FIRS Audit Targets in 2025: What Nigerian Businesses Need to Prepare For

The Federal Inland Revenue Service (FIRS) has substantially increased its audit activity in recent years, driven by revenue targets, improved data-matching capability, and increased information sharing with state revenue authorities. Businesses that once assumed their tax affairs were below the radar are discovering that assumption no longer holds.

Understanding what triggers a FIRS audit, and how to respond when one arrives, is increasingly important for any Nigerian business.

What Triggers a FIRS Audit

Audits are not always random. Several patterns consistently attract FIRS attention:

Inconsistency between returns: If your VAT returns, company income tax returns, and financial statements tell different stories about your revenue, FIRS data-matching systems are increasingly likely to flag the discrepancy.

Below-average effective tax rates: FIRS benchmarks effective tax rates against sector averages. A manufacturing company with an unusually low effective rate will attract scrutiny, even if the position is technically defensible.

Related-party transactions: The FIRS transfer pricing regime has matured. Businesses with significant intra-group transactions, management fees, or royalty payments to foreign related parties are audit targets.

Rapid revenue growth without corresponding tax: Companies showing strong top-line growth without corresponding growth in tax payments invite questions about the legitimacy of deductions being claimed.

Dormant withholding tax obligations: Many businesses consistently underdeduct WHT on payments to contractors and professional service providers. This is a common and easily identified gap.

Sector-specific sweeps: The FIRS periodically conducts sector-wide audits. Oil & gas servicing companies, telecoms vendors, real estate developers, and financial institutions have all been subject to focused sweep audits in recent years.

What to Expect When an Audit Commences

A FIRS audit typically begins with a letter requesting the production of specified records: tax returns, audited financial statements, management accounts, VAT records, and relevant contracts. The scope of the request often reveals the specific concern behind the audit.

You have a statutory obligation to respond within the specified timeframe. Failure to respond, or providing incomplete information, escalates the matter and reduces your ability to manage the outcome.

Preparing Before an Audit Arrives

The businesses that manage FIRS audits most successfully are those who have already done the work: their documentation is organised, their positions are defensible, and their counsel is already familiar with the structure.

The following should be in order at all times, not assembled in a rush when the audit letter arrives:

1. Transfer pricing documentation: FIRS regulations require contemporaneous documentation for related-party transactions above specified thresholds

2. WHT deduction schedules: Records of all payments to contractors and professionals and the corresponding WHT deductions

3. VAT reconciliations: Monthly reconciliation of output VAT, input VAT, and payments

4. Capital allowance computations: Supporting schedules for all capital allowance claims

5. Board minutes approving tax positions: Particularly for significant or novel positions

When You Receive an Audit Letter

1. Do not respond without legal advice

2. Do not volunteer information beyond what is requested

3. Identify the specific records requested and assess what they reveal

4. Engage tax counsel to review your exposure before the first meeting with FIRS

5. Consider whether a voluntary disclosure of any identified issues is strategically preferable to waiting for FIRS to discover them

The Appeal Process

If FIRS raises an assessment with which you disagree, you have the right to object within 30 days. If the objection is not resolved satisfactorily, you may appeal to the Tax Appeal Tribunal, an important backstop that many businesses do not exercise often enough.

The TAT process, while slower than many would like, has produced significant decisions in favour of taxpayers, including successful challenges to FIRS positions that were confidently asserted.

Kunle Sulyman Chambers provides FIRS audit support, transfer pricing advisory, and Tax Appeal Tribunal representation. If you are anticipating or currently managing a FIRS audit, contact our tax team.