How to Conduct a Tax Health Check for Your Business

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A Tax Health Check is a self-audit designed to find compliance gaps before the government does. In 2026, where late filing fines accrue daily, a quarterly health check can save an SME millions in avoidable interest.

Table of Contents

The 5-Step Health Check

The Turnover Match: Does your bank statement total match your VAT returns?
The TIN Link: Check TaxPro Max to ensure your RC Number is correctly appearing as your TIN.
The WHT Reconciliation: Are there any ‘hanging’ WHT credits you haven’t claimed yet?
Payroll Check: Ensure PAYE is calculated on the 2026 graduated rates.
Exemption Audit: If you are claiming ‘Small Business’ status, is your turnover actually below ₦50M?

If you find issues, consider the Voluntary Disclosure Program to wipe out penalties. For a professional review, contact KPMG Nigeria or visit the NRS Portal for the latest compliance tools.”

This FAQ provides a step-by-step “Tax Health Check” guide for Nigerian businesses, specifically updated for the 2026 Nigeria Revenue Service (NRS) requirements. A health check is your first line of defense against the new, automated penalties and “Bank Freezes” authorized under the Nigeria Tax Administration Act (NTAA) 2026.

FAQ: How to Conduct a Tax Health Check for Your Business

1. What exactly is a “Tax Health Check”?

A tax health check is a proactive internal audit of your financial records to ensure they align with the latest laws. Unlike a government audit, which is investigative and punitive, a health check is a self-diagnostic tool used to find and fix errors before the NRS flags them. In 2026, this focuses heavily on digital alignment between your bank statements and tax filings.

2. Step 1: Verify Your Classification (The ₦100M Rule)

The first step is determining which “bucket” your business falls into for the 2026 fiscal year.

Small Company: Turnover ≤ ₦100 million AND fixed assets < ₦250 million. (0% CIT, 0% Development Levy).
Medium/Large Company: Turnover > ₦100 million. (30% CIT + 4% Development Levy).
Professional Services: (Lawyers, Accountants, Consultants). You are taxed at 30% regardless of turnover.

3. Step 2: Reconcile “Bank Inflows” vs. “Declared Turnover”

The NRS now uses AI-driven data matching.

The Check: Run a report of all credits into your business bank accounts for the last 12 months.
The Goal: This total must match the “Gross Turnover” you reported on your VAT and CIT returns. If your bank shows ₦150 million in inflows but you only declared ₦90 million to stay in the “Small Company” bracket, you are at high risk for a Best of Judgment (BOJ) assessment and a bank account freeze.

4. Step 3: Audit Your Payroll for the 2026 Thresholds

Personal Income Tax (PIT) rules changed significantly on January 1, 2026.

Exemption Check: Ensure any staff earning ₦800,000 or less per year (approx. ₦66,667/month) are set to 0% tax.
Relief Check: The old “Consolidated Relief Allowance” (CRA) is gone. Ensure your payroll software now uses evidence-based reliefs (like the new Rent Relief, capped at ₦500k) rather than the old automatic percentages.

5. Step 4: Verify Your “TIN-to-NIN” and Vendor Links

Under the 2026 reforms, anonymity is dead.

Vendor Check: Review your supplier list. Engaging a vendor who is not tax-registered now carries a ₦5 million penalty.
TIN Check: Ensure your company’s 13-digit NRS Tax ID (often linked to your RC number) is active. For individual directors or sole traders, ensure your NIN is correctly mapped as your Tax ID.

6. Step 5: Review Value Added Tax (VAT) & E-Invoicing

If your turnover is above ₦50 million, you are a “VAT Agent.”

E-Invoicing Check: Are you issuing digital invoices with a QR Code and Cryptographic Stamp? In 2026, manual or “plain PDF” invoices are considered non-compliant and carry a ₦200,000 fine per transaction.
Input VAT Check: Ensure you have kept receipts for VAT paid on services and assets. Under the new rules, you can finally reclaim this “Input VAT” to reduce your monthly payment.

7. Step 6: Identify “Non-Allowable” Expenses

Not every business expense reduces your tax. During your health check, “add back” these items to your profit:

Fines or penalties paid to any government agency.
Personal expenses of directors.
Expenses where VAT was applicable but you failed to pay it (Section 21p of the NTA 2025).

8. Step 7: Check Your Withholding Tax (WHT) Credit Notes

Are you leaving money on the table?

The Check: Log into the TaxPro-Max/NRS Portal and check your “WHT Credit” balance.
The Action: Match this against your physical/digital WHT certificates. If a client deducted 5% but didn’t remit it, you must chase them immediately. These credits are “cash” you can use to pay your 2026 tax bill.

9. How often should I conduct this health check?

In the 2026 digital era, a quarterly review is the gold standard. Waiting until the end of the year to fix a “Bank vs. Tax” discrepancy is often too late, as the NRS portal flags inconsistencies in real-time.

10. What is the biggest “Red Flag” I should look for?

Consistent “Zero-Filing” while showing growth. If your social media shows your business opening new branches and hiring staff, but your NRS filings consistently show “No Profit” or “Small Company” status, you will trigger an automated Joint Audit (NRS and State IRS).