VAT Guide for Businesses in Nigeria 2026
Value Added Tax (VAT) is a consumption tax charged on goods and services in Nigeria. If you run a business, understanding VAT is crucial for compliance. This comprehensive guide covers everything you need to know about VAT in Nigeria.
VAT is separate from income tax. Even if your company pays 0% income tax (turnover < ₦25M), you may still need to register for VAT if you meet the threshold.
What is VAT?
Value Added Tax (VAT) is a tax charged on the supply of goods and services in Nigeria. It's collected by businesses on behalf of the government and remitted to FIRS.
- Current VAT Rate: 7.5% (as of 2020, increased from 5%)
- Who Pays: End consumers (businesses collect and remit)
- Who Collects: VAT-registered businesses
- Who Receives: Federal Inland Revenue Service (FIRS)
Who Must Register for VAT?
You must register for VAT if your business:
- Has an annual turnover of ₦25 million or more
- Sells taxable goods or services
- Is a company, partnership, or sole proprietorship
- Engages in importation of goods
- Provides taxable services
Note: Even if your turnover is below ₦25 million, you can voluntarily register for VAT.
VAT Registration Process
Step 1: Determine if Registration is Required
Calculate your annual turnover. If it's ₦25 million or more, registration is mandatory.
Step 2: Gather Required Documents
- CAC Registration Certificate
- Company TIN
- Proof of business address
- Bank account details
- Director/partner identification
- Business activity description
Step 3: Register Online or Offline
Online: Visit FIRS website, go to Taxpayer Portal, select VAT Registration
Offline: Visit FIRS office, complete VAT registration form, submit with documents
Step 4: Receive VAT Certificate
Once approved, you'll receive a VAT registration certificate with your VAT number. This must be displayed at your business premises.
VAT-able vs Non-VAT-able Items
VAT-able Goods and Services (7.5%)
- Most goods sold in Nigeria
- Professional services (legal, accounting, consulting)
- Restaurant and catering services
- Hotel accommodation
- Telecommunications services
- Banking and financial services (on fees)
- Entertainment services
- Most imported goods
Zero-Rated Items (0% VAT)
- Exported goods and services
- Goods and services supplied to diplomats
- Medical and pharmaceutical products
- Basic food items (unprocessed)
- Educational materials and services
- Agricultural equipment and inputs
Exempt Items (No VAT)
- Medical services
- Educational services (tuition)
- Residential rent
- Financial services (interest, not fees)
- Insurance services
How VAT Works
Input VAT: VAT you pay on purchases (can be reclaimed)
Output VAT: VAT you charge on sales (must be remitted)
VAT Payable: Output VAT - Input VAT = Amount to remit to FIRS
Example:
- You sell goods worth ₦1,000,000 → Output VAT: ₦75,000 (7.5%)
- You bought supplies worth ₦500,000 → Input VAT: ₦37,500 (7.5%)
- VAT to remit: ₦75,000 - ₦37,500 = ₦37,500
VAT Filing and Remittance
Filing Deadline
Monthly Deadline: 21st day of the following month
Example: January VAT return is due by February 21st
How to File VAT Return
- Log in to FIRS Taxpayer Portal
- Navigate to "File Returns" → "VAT Return"
- Enter:
- Total sales (excluding VAT)
- Output VAT collected
- Total purchases (excluding VAT)
- Input VAT paid
- VAT payable (Output - Input)
- Upload supporting documents (invoices, receipts)
- Submit and make payment
VAT Payment
- Pay through FIRS portal or designated banks
- Payment must be made by the 21st deadline
- Keep payment receipts as proof
- Late payment attracts penalties and interest
VAT Penalties
Late Filing Penalties
- Late Return: ₦50,000 for first month, ₦25,000 for each subsequent month
- Late Payment: 10% interest per annum on unpaid VAT
- Failure to Register: ₦50,000 penalty
- Failure to Issue Invoice: ₦5,000 per invoice
VAT Invoices and Documentation
As a VAT-registered business, you must:
- Issue VAT invoices for all sales
- Include your VAT number on invoices
- Show VAT amount separately on invoices
- Keep all VAT invoices and receipts
- Maintain VAT records for at least 6 years
Input VAT Recovery
You can reclaim VAT paid on business purchases (Input VAT) if:
- The purchase is for business purposes
- You have a valid VAT invoice
- The goods/services are used for taxable supplies
- You're VAT-registered
Note: You cannot reclaim VAT on exempt or personal purchases.
Common VAT Mistakes to Avoid
- ❌ Not registering when turnover exceeds ₦25 million
- ❌ Charging VAT on exempt items
- ❌ Not charging VAT on taxable items
- ❌ Filing late (penalties apply)
- ❌ Not keeping proper VAT records
- ❌ Not issuing VAT invoices
- ❌ Claiming input VAT on personal expenses
VAT for Small Businesses
Businesses with annual turnover below ₦25 million are not required to register for VAT. However:
- You cannot charge VAT to customers
- You cannot reclaim input VAT
- You can voluntarily register if you want to reclaim input VAT
Need Help?
- Contact FIRS VAT Department
- Visit FIRS website: www.firs.gov.ng
- Consult a tax professional for complex VAT situations
- Use FIRS TaxPro Max portal for filing
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