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The Federal Inland Revenue Service (FIRS) has introduced a real-time monitoring platform aimed at improving the tracking of Value Added Tax (VAT)-eligible electronic transactions across Nigeria’s rapidly expanding digital economy. In a move set to transform tax enforcement, the agency is directing banks, card schemes, fintech firms, and payment service providers to integrate with its newly launched Transaction Monitoring System.
According to FIRS Chairman, Zacch Adedeji, “This system represents a transformative leap in transaction visibility. By monitoring VAT-eligible activities in real time, we are fostering a fair and transparent digital marketplace for all stakeholders.”
The Transaction Monitoring System provides FIRS with real-time access to VAT-related transaction data, enabling automated invoice reconciliation and improved assessment of taxpayer thresholds. While the platform does not collect taxes directly, it centralises transaction visibility via a dashboard interface, supporting greater compliance across the financial services industry.
FIRS noted that Nigeria’s digital economy has significantly outpaced legacy tax monitoring mechanisms, contributing to persistent compliance gaps. The new platform leverages encryption and AI-driven validation tools to ensure data integrity and transparency.
Financial institutions are being required to connect due to their capability to track millions of micro-transactions, many of which fall below the ₦5 million ($3,265) reporting threshold currently mandated for banks. This integration will allow FIRS to audit VAT declarations against verified bank records and standardise data on taxable activities.
The initiative is backed by recent legislative changes. Under the Tax Administration Act enacted in June 2025, FIRS will from January 2026 be empowered to automate tax processes under Section 71, with stiff penalties for non-compliance outlined in Section 103—₦1 million for the first day of denial of system access and ₦10,000 per day thereafter. In the interim, the agency is acting under Section 25(4) of the FIRS Act, which allows for similar measures with a 30-day notice to taxpayers.
While the collection of transactional data is lawful, FIRS emphasized that it does not equate to automatic tax liability. All collected data will be cross-verified with taxpayer self-assessments to account for deductions and exemptions.
In recent stakeholder sessions, including virtual meetings with financial institutions, FIRS detailed the roadmap for integration. Institutions must register and connect to the platform via APIs, after which they can access a custom dashboard.
During transactions, financial institutions are expected to route data through FIRS’s VAT Rev Assure system before it is uploaded to the central monitoring portal. For payment service providers like Paystack and Flutterwave, VAT must either be calculated post-checkout or documented at the point of transaction—whether under the merchant’s or PSP’s VAT registration.
Institutions will submit real-time data via a secure admin portal, capturing both VAT amounts and gross transaction values. A dedicated support framework is also in place to manage refunds and related queries.
This real-time integration marks a strategic step by FIRS to close tax leakages, enhance digital tax compliance, and align Nigeria’s fiscal policy tools with the evolving nature of electronic commerce.
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