FG lowers interest rate on unpaid taxes

The Federal Government has reduced the interest rate payable on late payment of taxes, with the new regime taking effect from October 1.

The Minister of Finance and Coordinating Minister of the Economy, Taiwo Oyedele, issued the Nigeria Tax Administration (Interest on Late Payment of Tax) Order, 2026, under Section 65 of the Nigeria Tax Administration Act, 2025.

Under the new order, interest on tax payable in naira will be charged at the Central Bank of Nigeria’s (CBN) Monetary Policy Rate (MPR) plus one percentage point, subject to a floor of the yield on 364-day Treasury Bills.

The new rate represents a reduction from the previous five percentage-point spread applicable to late tax payments.

For taxes payable in foreign currency, the interest rate will be based on the Secured Overnight Financing Rate (SOFR), an international benchmark for US dollar rates, plus six percentage points.

The order provides that where SOFR is discontinued, its officially recognised successor rate will apply.

The Federal Government said the new framework was designed to link the cost of late tax payment more closely to prevailing market rates, while providing taxpayers with greater certainty about their liabilities.

Oyedele said the measure would ensure that delaying tax payments does not become a cheaper source of financing than borrowing from the market.

“Tax that is due belongs to the public. When it is paid late, Government may have to borrow to fill the gap, and the cost falls on everyone.

“This Order ties the cost of late payment to real market rates, so that delaying tax does not become a cheaper form of credit than the market itself,” he said.

The minister added that the new framework would also promote certainty and consistency in tax administration across the country.

“Just as important is certainty. Every taxpayer, whether dealing with the Nigeria Revenue Service or a State revenue service, will know the rate in advance, see it published every month, and be charged in the same way,” he said.

The applicable interest rate will be set once every calendar month, based on the position at the last business day of the preceding month.

The Nigeria Revenue Service (NRS) has been directed to publish the applicable rates on its website by the third business day of each month.

The interest will be calculated as simple interest on a daily basis, running from the due date until the tax liability is settled.

The new rates will apply to interest arising from October 1, 2026, including interest on tax that became due before that date.

However, interest that arose before October 1 will not be affected to the extent that it was specifically provided for under the rules in force at the time.

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

The government clarified that the new order does not alter the 10 per cent penalty for late payment provided under Section 65 of the Nigeria Tax Administration Act.

Tax authorities also retain the power under Section 66 of the Act to waive interest or penalties where good cause is established.

The new regime applies to self-assessment by taxpayers, the Nigeria Revenue Service and the State and Federal Capital Territory Internal Revenue Services.

The Federal Government advised taxpayers to file their returns and pay applicable taxes within the stipulated deadlines, while those with outstanding liabilities were encouraged to settle them promptly or engage the relevant tax authority.

The post FG lowers interest rate on unpaid taxes appeared first on The Sun Nigeria.