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Nigeria VAT System – Complete Guide

📘 What is VAT in Nigeria?

Nigeria introduced the Value Added Tax (VAT) in 1993, replacing the Sales Tax regime. It is an indirect consumption tax administered by the Federal Inland Revenue Service (FIRS). VAT applies to the supply of goods and services, including digital services consumed within Nigeria.
The VAT system in Nigeria has undergone reforms over the years, with significant updates made in the Finance Act 2019 and subsequent annual Finance Acts.

📊 VAT Rates in Nigeria

🔸 Standard VAT Rate: 7.5%
Applies to most taxable goods and services supplied within Nigeria.

🟢 Zero-rated (0%) Supplies:
  • Exported goods
  • Certain government-approved humanitarian aid items

🚫 Exempted Goods and Services:
  • Basic food items
  • Educational materials
  • Medical services
  • Rent for residential accommodation
  • Transportation by road (except air and sea travel)

🏢 VAT Registration Requirements in Nigeria

✅ Mandatory Registration:
Businesses are required to register for VAT with FIRS if:
  • Annual taxable turnover exceeds ₦25 million
  • They are non-resident suppliers providing digital services in Nigeria

🌍 Non-resident Digital Businesses:
Foreign service providers offering digital products or services to Nigerian consumers (B2C) are required to register and collect VAT through a simplified compliance scheme.
This includes:
  • Streaming platforms
  • Online advertising services
  • Software-as-a-Service (SaaS)
  • E-books, e-courses, and apps

🌐 VAT on Digital Services

The Nigerian government has mandated VAT compliance for foreign digital service providers, under the "Significant Economic Presence" (SEP) rule.

🔍 Who's affected?
  • Companies like Netflix, Google, Meta, Amazon, Zoom, Spotify, etc.

📌 Key Requirements:
  • Register for VAT with FIRS
  • Charge 7.5% VAT to Nigerian consumers
  • File VAT returns quarterly

🔢 VAT Number Format

A Nigerian VAT-registered business is issued a Tax Identification Number (TIN), which serves for both income tax and VAT purposes.

🧾 Example Format:
12345678-0001

This number must appear on all VAT invoices and tax filings.

🧾 VAT Invoicing Requirements

All VAT-registered businesses must issue invoices containing:
  • Supplier’s name, address & TIN
  • Customer’s details (if applicable)
  • Invoice date and unique number
  • Description of goods/services
  • VAT rate (7.5%) and amount charged
  • Total amount (including VAT)
Invoices must be issued in Naira (₦), and businesses must maintain proper records for at least 6 years.

🧮 VAT Calculation Example

Example:
If a business sells services worth ₦500,000:
  • VAT @ 7.5% = ₦37,500
  • Total Invoice = ₦537,500
  • If eligible input VAT = ₦10,000
  • Net VAT payable = ₦27,500

📅 VAT Filing & Payment in Nigeria

🗓️ Filing Timeline:
  • VAT returns must be filed monthly
  • Deadline: 21st day of the following month

💻 Filing Portal:
  • FIRS TaxPro Max Portal: https://taxpromax.firs.gov.ng
Businesses must file even if no VAT was collected in that period (nil returns).

💳 Payment:
  • Payment must be made in full via approved electronic methods

🌍 Imports & Exports

  • Imports: Subject to VAT at point of entry, collected by the Nigeria Customs Service (NCS)
  • Exports: Generally zero-rated, provided proper documentation is submitted

🚫 VAT Exemptions List

The Finance Act outlines VAT exemptions on:
  • Agricultural products
  • Baby products
  • Educational books and materials
  • Healthcare and medical services
  • Residential lease and rent
  • Life insurance services
  • Banking services (interest income)
Note: Exempt goods/services do not allow input VAT recovery.

✅ Compliance Tips for VAT in Nigeria

  • ✔️ Register with FIRS if eligible
  • ✔️ File monthly VAT returns on time
  • ✔️ Maintain electronic records of all invoices
  • ✔️ Charge 7.5% VAT correctly on taxable supplies
  • ✔️ Understand exemptions and zero-rating to avoid penalties
  • ✔️ Comply with VAT rules for cross-border and digital services
  • ✔️ Keep documents for at least 6 years for audits

📌 Conclusion

Nigeria's VAT system is evolving, especially with the inclusion of digital economy taxation. Whether you're a local business or a foreign digital platform, it's essential to comply with FIRS guidelines, charge the correct VAT, and file returns promptly. Staying updated with Finance Acts and FIRS notices is crucial for smooth business operations in Nigeria.
👉 Use our Nigeria VAT Calculator at GSTCal.org to easily calculate VAT amounts and stay compliant.