What is VAT in Nigeria and who is the regulatory authority?
Value Added Tax (VAT) in Nigeria is a consumption tax levied at 7.5% on the supply of taxable goods and services. It is governed by the Value Added Tax Act (Cap V1, LFN 2004, as amended). The Nigerian Revenue Service (NRS) — formerly known as the Nigeria Revenue Service (NRS) — is responsible for administering VAT in Nigeria. NRS was established as the new name for NRS under the Nigeria Revenue Service Act 2023. All obligations, TIN registrations, and tax filings previously with NRS are now with NRS.
When must a Nigerian business register for VAT?
Under the NRS Act 2025 Section 42, any person whose annual taxable supplies exceed ₦25 million must register for VAT with the Nigerian Revenue Service (NRS). Registration must be completed before making any taxable supply once that threshold is crossed. Professional services firms must register regardless of turnover. Small businesses below ₦25M may voluntarily opt in to register (e.g. to recover input VAT on purchases) by written notice to NRS.
What are the VAT filing deadlines in Nigeria?
VAT returns in Nigeria must be filed monthly. The deadline is the 21st day of the month following the month of supply. For example, January VAT returns are due by 21 February. Returns are filed through the NRS online platform (formerly TaxPro Max). Late filing attracts a penalty of ₦10,000 for the first month and ₦5,000 for each subsequent month of default, plus interest on unpaid VAT at the CBN monetary policy rate plus 5%.
Which goods and services are exempt from VAT in Nigeria?
The following are VAT-exempt in Nigeria: (1) Basic food items such as local staple foods (yam, rice, beans, gari), (2) Medical and pharmaceutical products, (3) Educational services provided by educational institutions, (4) Books and educational materials, (5) Baby products, (6) Fertilisers, agricultural products, farming equipment, (7) Locally produced sanitary towels and diapers, (8) Commercial aircraft and spare parts. Businesses with annual taxable supplies below ₦25M (the NRS Act 2025 S.42 VAT registration threshold) are not required to register or charge VAT — though they may voluntarily opt in to recover input VAT.
What is input VAT and output VAT, and how do I reconcile them?
Output VAT is the 7.5% VAT you charge on your sales (collected on behalf of NRS). Input VAT is the 7.5% VAT you pay on your business purchases from VAT-registered suppliers. In your monthly VAT return, you declare both: Output VAT collected minus Input VAT paid = Net VAT payable to NRS. If your input VAT exceeds output VAT in a period, you have a VAT credit which can be carried forward to offset future VAT liabilities (refunds from NRS are rare in practice and often delayed). Always retain all supplier invoices showing VAT to support your input VAT claims.
What are the penalties for VAT non-compliance in Nigeria?
NRS (formerly NRS) imposes significant penalties for VAT violations: (1) Failure to register for VAT: ₦10,000 fine for individuals, ₦25,000 for companies, plus daily penalties, (2) Failure to file monthly return: ₦10,000 first month, ₦5,000 per subsequent month, (3) Failure to remit collected VAT: 150% of the VAT due plus interest, (4) Making false VAT returns: criminal prosecution with fines and/or imprisonment, (5) Failure to issue VAT invoices: monetary penalties and potential closure of business premises. Repeated non-compliance can trigger a full NRS tax audit.
What is reverse charge VAT and when does it apply in Nigeria?
Reverse charge VAT applies when a Nigerian business purchases services from a foreign supplier who is not registered for VAT in Nigeria. In this case, the Nigerian recipient of the service is required to self-assess and remit the 7.5% VAT to NRS. This commonly applies to cloud software subscriptions, digital advertising (Google Ads, Facebook Ads), consulting from foreign firms, and streaming services. The Finance Act 2019 extended VAT to digital services supplied by non-resident companies to Nigerian customers.
What is the relationship between VAT and Withholding Tax (WHT)?
VAT and Withholding Tax (WHT) are separate tax obligations in Nigeria. VAT is on consumption (charged to the buyer at 7.5%). WHT is deducted by the payer at source on specific payments (e.g., 5% on consulting fees, 10% on rent). When billing a client, your invoice shows the full VAT amount, while the client separately calculates and deducts WHT from the net payment to you. You should receive a WHT credit note from the payer to offset your Companies Income Tax (CIT) or Personal Income Tax (PIT) — it does not reduce your VAT liability.
