No tax on bank balances
The Chartered Institute of Taxation of Nigeria has clarified that contrary to widespread public fears, there is no tax on bank balances under Nigeria’s current tax reform framework.
Instead, only specific electronic transfers attract a ₦50 stamp duty charge, while the new policy measures are structured to protect low-income earners and strengthen voluntary tax compliance.
Speaking during a televised interview, Chairman of the CITN Abuja District, Ben Enamudu, cautioned Nigerians against misinformation circulating about the tax legislation, especially claims suggesting that bank deposits and savings would be subjected to direct taxation.
According to him, the country’s tax laws do not include any provision that imposes a tax on money held in bank accounts, stressing that the no tax on bank balances principle remains unchanged.
What exists, he explained, is a stamp duty applied only when eligible transfers are made from one account to another.
Enamudu stated that the ₦50 charge does not apply to deposits, savings, or account balances, reiterating that the charge is strictly triggered during certain outward transfers.
He added that the reform also modifies how the burden of the stamp duty is shared, with only the sender now responsible for the ₦50 fee, unlike the previous arrangement where both parties were charged.
He further clarified that salary payments, wage remittances, and transfers below ₦10,000 do not attract the charge, in line with the pro-poor orientation of the reform.
However, transfers between accounts held across different banks — even when owned by the same individual — fall under transactions that trigger the stamp duty rule.
The clarification reinforces the government’s consistent position that there is no tax on bank balances, only on qualifying transactions.
Beyond electronic transfers, Enamudu highlighted exemptions in the value-added tax structure.
He noted that essential sectors such as basic food items, pharmaceuticals, healthcare services, and education remain shielded from VAT obligations to reduce financial pressure on vulnerable households.
According to him, these measures align with the broader policy goal of protecting economic welfare while expanding compliance.
The CITN leader also shed light on a new rent relief policy embedded in the reform package. Under the provision, tenants are eligible for a relief equivalent to 20 percent of annual rent, subject to a maximum claimable amount of ₦500,000.
He explained that the relief is capped to ensure equitable application across income categories and to provide structured support to urban and semi-urban residents dealing with rising accommodation costs.
On the compliance framework, Enamudu reaffirmed that Nigeria operates a self-assessment tax system, under which individuals are expected to voluntarily declare all legitimate income streams.
While employers remit PAYE on formal earnings, individuals earning rental income, business proceeds, or consultancy fees must file additional declarations to fully regularise their tax status.
He explained that this mechanism allows the tax system to remain inclusive without undermining the no tax on bank balances policy principle.
He also disclosed that states are expected to adopt presumptive taxation structures for informal sector operators such as traders and artisans.
The approach, he said, would be guided by revenue efficiency considerations and the economic realities of each jurisdiction, ensuring that informal earners are captured into the tax net without undue hardship.
Addressing ongoing debates over income thresholds and exemptions, the CITN representative reiterated that the much-debated ₦800,000 figure relates strictly to taxable income, not total annual earnings.
Statutory deductions — including pension contributions, insurance premiums, health scheme payments, and housing fund contributions — are factored in before determining taxable thresholds.
Where an individual’s taxable income remains at ₦800,000 or below after deductions, they fall within the exempt category.
Enamudu maintained that the reform is intentionally structured to be pro-poor, stressing that the overriding goal is to widen participation, enforce fairness, and improve efficiency across the tax ecosystem.
He emphasised that the philosophy guiding the reforms is to “tax the fruit, not the seed,” ensuring that the economic foundations of low-income earners are not eroded.
This approach also reinforces the clarity that there is no tax on bank balances, as savings and deposits form part of citizens’ financial security buffers.
He confirmed that the law has already come into effect, with implementation now in a transitional stage that allows institutions and taxpayers to adjust to operational changes.
Over time, he said, improvements in efficiency and formalisation are expected to expand the tax base, enhance revenue performance, and strengthen the government’s fiscal stability.
The reforms, he added, are not designed to increase tax burdens arbitrarily but to modernise administration, harmonise structures, and reinforce social trust in the fiscal system.
With misconceptions now being addressed — particularly around the no tax on bank balances issue — he urged citizens to rely on verified policy guidance and avoid misinformation that could fuel unnecessary anxiety within the financial system.
Stakeholders across the fiscal policy space continue to assess the implications of the reform framework, especially its potential to support revenue growth without undermining purchasing power or financial inclusion.
As implementation progresses, authorities are expected to refine compliance processes, enhance enlightenment efforts, and sustain stakeholder engagement to consolidate transparency and accountability.
By clearly restating that there is no tax on bank balances, while outlining exemptions, reliefs, and compliance responsibilities, the CITN intervention is expected to calm public concerns and improve understanding of the country’s evolving tax architecture.