FG cuts interest rate on late tax payment

By Nana Musa

The Federal Ministry of Finance has announced reduction in interest rate on late tax payment effective from October 1, 2026.

This is contained in a statement issued by the Ministry in Abuja on Thursday.

It said the reduction is contained in the Nigeria Tax Administration (Interest on Late Payment of Tax) Order, 2026.

The Minister of Finance and Coordinating Minister of the Economy, Mr Taiwo Oyedele, issued the order under the Nigeria Tax Administration Act, 2025.

The order applies uniformly to the Nigeria Revenue Service (NRS), State Internal Revenue Service’s and the FCT Internal Revenue Service.

Under the new order, interest on tax payable in naira would be charged at the Central Bank of Nigeria’s (CBN) Monetary Policy Rate plus one percentage point.

However, the applicable rate would not fall below the yield on 364-day treasury bills.

This represents a reduction from the previous five percentage point spread applicable to late tax payments.

For taxes payable in foreign currency, interest would be charged at Secured Overnight Financing Rate (SOFR) plus six percentage points.

SOFR is the international benchmark for United States dollar interest rates.

The order provides that its official successor rate would apply if SOFR is discontinued, while the applicable interest rate would be determined once monthly, based on the last business day of the preceding month.

The NRS is required to publish the applicable rates on its website by the third business day of each month.

Interest would be calculated as simple interest daily, from the tax due date until payment is made.

The new rates apply to self assessment taxpayers, the NRS and State and FCT tax authorities.

Oyedele said that the order linked the cost of late tax payments to prevailing market rates.

“Tax that is due belongs to the public,” he said.

Oyedele said that late payment could force government to borrow to cover the funding gap.

He said the measure would prevent taxpayers from treating delayed tax payments as cheaper credit than available market financing.

The minister said the order would also provide certainty by ensuring taxpayers know applicable rates in advance.

Oyedele said that clear and predictable rules would make tax compliance easier and support a fair tax system.

He said that the new rates would apply to interest arising from Oct. 1, including interest on taxes that became due earlier.

However, interest that arose before Oct. 1, would remain governed by applicable rules in force at that time.

The order supersedes the 2017 notice on interest on unpaid taxes and other earlier notices on the subject.

It does not alter the ten per cent penalty for late payment prescribed under Section 65 of the Act.

Tax authorities may also waive applicable penalties or interest where good cause is established, under Section 66 of the Act.

The minister advised taxpayers to file returns and pay applicable taxes promptly to avoid additional liabilities.

Oyedele also urged taxpayers with outstanding liabilities to settle them or engage the relevant tax authority.

(NAN)