When sending money, most people focus on the amount and the recipient. The description box is often ignored or filled with something vague like “transfer” or “payment.”
Under Nigeria’s current tax landscape, that small detail can cause real problems.
The Hidden Risk of Blank or Vague Descriptions
Recent tax reforms in Nigeria have placed greater emphasis on transparency, traceability, and proper documentation of financial transactions. With increased monitoring by tax authorities, unexplained or poorly described transfers can raise red flags.
During tax audits, investigations, or compliance reviews, transactions without clear descriptions may be questioned. If you can’t show the purpose of a transfer, it may be treated as undeclared income, a disguised benefit, or a taxable transaction.
Why Descriptions Matter for Tax Compliance
A proper transaction description helps to:
- Clearly show the purpose of the payment
- Distinguish between income, loans, gifts, reimbursements, and business expenses
- Support your records during tax audits or reviews
- Reduce the risk of penalties arising from misclassified transactions
For example, “Client retainer – March 2026” or “Loan repayment” provides context that tax authorities can easily understand. “Money sent” does not.
Think Ahead in a Stricter Tax Environment
What feels like a simple transfer today may need an explanation tomorrow. With Nigeria’s tax laws becoming more data-driven and enforcement-focused, historical bank records are increasingly relied upon.
Months or years later, you may not remember why a payment was made. But the tax authorities will still expect a clear explanation backed by records.
When in Doubt, Get Legal Guidance
If you’re unsure how to properly document transactions, or if a past transfer is already being questioned, it’s important to seek legal advice early. Clear guidance and proper representation can make a significant difference during audits, disputes, or tax reviews.
LawHaven Solicitors provides legal clarification and representation to help individuals and businesses navigate Nigeria’s evolving tax and compliance requirements with confidence.