FIRS Partners with Banks and Fintechs for VAT Monitoring

As part of an aggressive effort to stop tax leaks in the rapidly expanding digital economy, Nigeria’s Federal Inland Revenue Service (FIRS) has created a real-time portal to track all VAT-eligible electronic transactions and is requiring integration from banks, card schemes, fintechs, and payment service providers, according to an internal presentation conducted by a press team and media firm.

“Transaction visibility has significantly increased because of this system. In a statement, FIRS executive chairman Zacch Adedeji said, “We are promoting a fair and transparent digital marketplace for all stakeholders by monitoring VAT-eligible activities in real time.”

Financial institutions must use the site, known as the “Transaction Monitoring System,” to route transactions. This allows FIRS to see in real time which payments are eligible for VAT and where deductions might be made.

The action represents a significant change in the way the tax agency enforces financial services industry compliance. By integrating with the site, FIRS will be able to reconcile invoices and automatically determine taxpayer criteria. The portal will be used by the agency to track transactions in real time via a centralized dashboard, but it will not be used for direct tax collection.

According to the statement from FIRS, “Nigeria’s digital economy has experienced exponential growth, transforming how businesses operate and process transactions.” “But this growth has outpaced conventional tax monitoring techniques, resulting in gaps in compliance and transaction visibility.”

The government created the “platform (to) focus on real-time data collection, monitoring, and ensuring complete transparency in the digital world,” the statement continued. “Encryption and AI-driven validation to maintain transaction integrity” is another claim made by FIRS.

Since banks and other financial institutions are only required to disclose transactions above ₦5 million ($3,200), financial institutions are being asked to link to the platform in order to appropriately track taxes on millions of micro-transactions. The tax office can check tax statements against bank records and identify the single largest consumption tax leakage point by connecting the institutions. Additionally, the agency has the ability to standardize all taxable transaction data.

The administration of President Bol Tinubu passed new tax legislation in June 2025, giving the tax agency the authority to automate tax procedures. The agency can now use technology to manage tax assessment, collection, accounting, and data collection under Section 71 of the Tax Administration Act. Section 103 of the statute also stipulates severe consequences for noncompliance. ₦10,000 ($6.5) for every extra day of default, and ₦1 million ($652) for the first day of not granting system access.

The agency is depending on Section 25(4) of the FIRS Act, which grants it the same authority with a 30-day notice to the taxpayer, since those laws will go into effect in January 2026.

Although it is allowed to gather transaction data to enhance tax compliance, this information is not a reliable indicator of tax liabilities. The tax agency verifies financial data against self-assessments, which allow both individuals and businesses to claim deductions, before relying on it. Eligible deductions lower the taxable income, thus a person who makes ₦5 million ($3,265) a year is not taxed on the whole amount.

An attendee describes the way it works and operates as FIRS officials described the agency’s plan and roadmap for integrating the Transaction Monitoring System into financial institutions’ digital infrastructure over many Zoom meetings. Prior to activating their dashboard, institutions must register directly on the portal and integrate via APIs in order to onboard. 

In a normal transaction flow, financial institutions must provide the transaction data to the site after first sharing it via API with FIRS’ VAT Rev Assure system, the agency’s tech-enabled tool to guarantee that all VAT is correctly calculated and timely remitted.

If VAT is not collected at checkout, payment service providers (PSPs) such as Paystack and Flutterwave are required to compute VAT on the entire transaction value. PSPs must include the merchant’s VAT or their own VAT amount with the transaction data if VAT is applied at checkout. For consumer payments, all institutions are required to document the gross payment value as well as the VAT amount.

PSPs will access a secure admin site to exchange real-time transaction data, including the VAT component, with customers and merchants in order to make this possible. After that, the information is delivered to the Transaction Monitoring System and categorized appropriately. Refunds can be handled using a simplified support route.