The Nigerian tax environment is constantly evolving, to stay up with the constantly evolving business environment, companies need to regularly evaluate their tax structures, tax positions, and tax compliances. This will help to guarantee that overall tax positions are supported by sufficient evidence, compliances are tracked, and any potential litigation-related issues are handled properly.
The Finance Acts in Nigeria had been adopted as a fiscal policy model which introduced over 150 amendments to existing tax and regulatory legislations in Nigeria and is aimed at promoting fiscal sustainability, enhancing revenue generation, and supporting small businesses. As at date, the Nigerian Government has introduced four Finance Acts which are Finance Acts of 2019, 2020, 2021, and 2023. These pieces of legislation have changed the tax compliance regime for businesses in general which necessitates the need for consistent Tax Health Checks. The impact of the Finance Act on tax compliance in Nigeria has been significant. It has led to increased revenue generation for the government, increased tax compliance for taxpayers, and reduced the incidence of tax evasion and avoidance. The Finance Act has also introduced several measures to simplify the tax system, making it easier for taxpayers to comply with tax laws and regulations.

The Tax Health Check is a comprehensive review of a taxpayer’s tax affairs to ensure compliance with tax laws and regulations. It is aimed at identifying areas of non-compliance and addressing them before they become a problem for the taxpayer. It also helps taxpayers to avoid penalties, interest, and other charges that may arise from non-compliance.It involves a comprehensive review of a taxpayer’s tax affairs, including tax returns, financial statements, and other relevant documents. The review is conducted by a qualified tax professional who assesses the taxpayer’s compliance with tax laws and regulations.Best practices for conducting a Tax Health Check in line with the Nigerian Finance Act include engaging qualified tax professionals, conducting the review in a timely manner, and ensuring that all relevant documents are reviewed. Taxpayers should also ensure that they have a good understanding of tax laws and regulations and seek professional advice where necessary.

STEPS IN CONDUCTING TAX HEALTH CHECK
1. Understanding the Company’s nature of business; the industry it operates.
2. Determining the scope of work to enable you to work effectively and efficiently.
3. Establish a timeline; Every task should have its own timeline.
4. Collect sufficient data; Verify that the information obtained is sufficient, accurate, and error-free.
5. Identify risks and concerns: Determine the hazards that might arise from a failure to provide necessary documentation or from a failure to comply with applicable tax legislation.
6. Recognize opportunities; Conduct a thorough examination of the tax reconciliation process to make sure that all potential avenues for lowering tax obligations or recouping unpaid taxes are found.
7. Prepare your tax report; recommending solutions for danger areas and strategies to guarantee tax compliance.

Despite the benefits of Tax Health Checks, there are several challenges faced by taxpayers and tax authorities in implementing the procedure. These challenges include a lack of awareness among taxpayers, a shortage of qualified tax professionals, and a lack of cooperation from taxpayers. To improve the implementation of Tax Health Check procedures in Nigeria, it is recommended that tax authorities provide more education and awareness campaigns to taxpayers. This will help to increase awareness of the benefits of the Tax Health Check and encourage more taxpayers to conduct the review.
This note should not be taken as tax advice, please contact your tax manager if you require any clarification.

Daniel Fowobaje
Senior Associate, Tax Audit.
d.fowobaje@taxaide.com.ng
info@taxaide.com.ng