Starting January 1, 2026, the way we send money in Nigeria will no longer be about a “transaction successful” notification. It’s a conversation with the taxman.
With the launch of the Nigerian Tax ID Portal and the rebranding of the FIRS to the Nigeria Revenue Service (NRS), your bank account is now directly linked to your NIN or CAC number. This means every kobo that enters your account will be monitored by an automated system that checks your income.
Here’s what you need to know about payment descriptions in the new Nigerian tax system, and how a few simple words can help you avoid big tax problems.
The Key Change: Why Your “Memo” Matters
In the past, you might have written “Enjoy,” “For the boys,” or left the payment description blank. Starting in 2026, this could lead to issues.
The NRS now uses Artificial Intelligence (AI) and Desk Audits to scan bank inflows. If a large sum of money hits your account without a clear label, the system’s “default setting” is to assume it is Taxable Income. If you can’t prove otherwise, you might find yourself being taxed on money that was actually a gift, a loan, or just a refund from a friend.
Think of these narrations as your first line of defence. By using specific language, you categorise your money so the NRS knows precisely what is, and isn’t, taxed.
1. “Gift / Family Support”
- The Logic: According to the Nigeria Tax Act 2025, genuine gifts from family and friends are not taxed.
- When to use it: When your spouse sends money for groceries or your brother sends a birthday gift.
- Why it works: It labels the inflow as a “Transfer of Wealth,” not “Earned Income.”
2. “Refund / Reimbursement”
- The Logic: You only pay tax on money you gain. If you paid for a group lunch and your friends pay you back, you haven’t made a profit.
- When to use it: When sharing utility bills, group contributions, or getting repaid for something you bought for someone.
- Why it works: It tells the system this is a “Net-Zero” transaction.
3. “Personal Transfer / Savings”
- The Logic: Moving N50,000 from your Access Bank to your Kuda account doesn’t mean you earned N50,000.
- When to use it: When transferring money between your own accounts.
- Why it works: It prevents “Double Counting,” where the system thinks you earned the same money twice.
4. “Loan Received”
- The Logic: A loan is money you have to pay back. It is not considered income.
- When to use it: When borrowing from a friend or a licensed digital lender.
- Why it works: It records the money as a debt on your “digital balance sheet.”
5. “Capital Contribution”
- The Logic: If you’re a business owner, putting your personal savings into your business account to buy stock.
- When to use it: When transferring personal funds to a business (CAC-registered) account.
- Why it works: It separates “Sales Revenue” (taxable) from “Owner’s Equity” (not taxable).
Who Actually Pays?
You might be wondering, “Am I even big enough for the NRS to care about?” The data says yes. The government is casting a vast net to hit its goal of an 18% tax-to-GDP ratio by 2027.
| Scenario | Tax Rate | Your Strategy |
| Annual Income < N800,000 | 0% | You are exempt, but still use narrations to keep your records clean. |
| SME Turnover < N50 Million | 0% (CIT) | Small businesses pay no Corporate Income Tax, but must use clear narrations to prove they are below the N50m limit. |
| Unlabeled Inflows | Varies | If the NRS “guesses,” they will apply the standard PIT rates (up to 25%). |
Conclusion
In 2026, silence can be costly. If you receive a money transfer and the narration is blank, an algorithm decides your tax bill for you. The goal isn’t to avoid taxes; it’s to make sure you only pay what you legally owe. By teaching your family, friends, and customers to use the correct descriptions, you protect your savings.
