Director Penalty Notice Template for Nigeria

A Director Penalty Notice is a formal warning issued by Nigeria's Federal Inland Revenue Service (FIRS) to company directors when their business fails to meet tax obligations. It holds directors personally responsible for unpaid company taxes, including VAT, PAYE deductions, and withholding tax.

Once served, directors have 21 days to act by either paying the debt, putting the company into administration, or starting its liquidation. If they don't respond, they become personally liable for the tax debt - meaning FIRS can recover the money directly from their personal assets, even if they later resign from the company.

The FIRS issues Director Penalty Notices when companies repeatedly miss tax payments or show patterns of non-compliance with Nigerian tax laws. Common triggers include failing to remit VAT collections, defaulting on PAYE deductions, or consistently late filing of company tax returns.

Tax authorities typically send these notices after multiple payment reminders have failed. They're particularly useful when dealing with companies that appear to be trading while insolvent, or when directors seem to be using company funds for personal purposes instead of meeting tax obligations. The notice creates urgency by shifting liability to directors personally, often prompting immediate action to resolve outstanding tax debts.

• Standard Tax Debt Notice: Issued for general tax defaults, specifying the exact amount owed and payment deadline
• Lockdown Penalty Notice: Targets directors who deliberately shield company assets from tax collection
• PAYE Recovery Notice: Specifically addresses unpaid employee tax deductions and contributions
• VAT Enforcement Notice: Focuses on recovering unremitted Value Added Tax collections
• Corporate Tax Default Notice: Used for outstanding company income tax obligations and related penalties

• Federal Inland Revenue Service (FIRS): Issues and enforces Director Penalty Notices, monitors compliance, and pursues recovery actions
• Company Directors: Primary recipients who become personally liable for tax debts, must respond within the notice period
• Tax Consultants: Advise directors on compliance options and help negotiate payment arrangements with FIRS
• Corporate Lawyers: Review notices, represent directors in disputes, and guide on legal implications
• Company Accountants: Calculate tax liabilities, maintain records, and assist in resolving outstanding payments

• Company Details: Gather accurate company registration number, tax identification number, and registered address
• Tax Assessment: Compile detailed records of unpaid taxes, including specific amounts and periods of default
• Director Information: Collect full legal names, addresses, and appointment dates of all current directors
• Payment History: Document previous payment reminders, communications, and attempted collections
• Notice Format: Use FIRS-approved template structure, ensuring all mandatory warning statements and deadlines are included
• Delivery Method: Prepare for proper service through registered mail or authorized agents to ensure legal validity

• Official Header: FIRS letterhead, reference number, and date of issuance
• Company Identification: Full registered name, RC number, TIN, and registered address
• Director Details: Complete names and addresses of all liable directors
• Tax Liability: Itemized breakdown of outstanding taxes, penalties, and interest
• Legal Authority: Citation of relevant sections of Nigerian tax laws
• Compliance Timeline: Clear 21-day deadline and available compliance options
• Penalty Statement: Explicit warning of personal liability consequences
• Authentication: Authorized FIRS officer's signature and official stamp

A Director Penalty Notice differs significantly from a Notice of Default in both purpose and legal implications. While both are formal notices of non-compliance, their scope and consequences are quite different.

• Legal Authority: Director Penalty Notices are specifically issued by FIRS for tax defaults, while Notices of Default can be issued by any creditor for various contractual breaches
• Personal Liability: Director Penalty Notices create direct personal liability for company directors, bypassing corporate protection. Notices of Default generally maintain the corporate veil
• Response Timeline: Director Penalty Notices give a strict 21-day compliance window. Notices of Default often allow negotiable remedy periods
• Enforcement Options: Director Penalty Notices lead to personal asset recovery by FIRS. Notices of Default typically trigger contractual remedies or court proceedings against the company