Last updated: 13 October 2026. Nigeria’s tax laws changed on 1 January 2026, and published guides do not always agree on thresholds and penalty amounts. This article is general information, not tax advice. Confirm your own position with the Nigeria Revenue Service (NRS) or a qualified tax adviser.
VAT in Nigeria at a glance (2026)
- Standard rate: 7.5%, unchanged by the 2025 tax reforms.
- Tax authority: the Nigeria Revenue Service (NRS), which replaced the Federal Inland Revenue Service (FIRS).
- Filing and payment: VAT for a month is due by the 21st of the following month.
- Big change for businesses: input VAT can now be claimed on services and fixed assets, not only goods.
- Small-business relief: small businesses are treated more favourably, but sources disagree on the exact thresholds, so check before you rely on an exemption.
Value Added Tax (VAT) is the 7.5% tax you see on many receipts, and since January 2026 it works under new laws, with a new tax authority, new digital systems and different rules on what businesses can claim back. This guide explains how VAT works in Nigeria today, who must register, how to file, what is zero-rated or exempt, the penalties reported for getting it wrong, and the mistakes small businesses make most often.
What Changed on 1 January 2026
On 1 January 2026 four new tax laws took effect: the Nigeria Tax Act 2025, the Nigeria Tax Administration Act 2025, the Nigeria Revenue Service (Establishment) Act 2025 and the Joint Revenue Board (Establishment) Act 2025. Together they repealed the old Value Added Tax Act and renamed FIRS the Nigeria Revenue Service. The main changes for VAT are:
- The 7.5% rate stays. Proposals to raise it to 15% were not adopted.
- Wider input VAT recovery. Businesses can claim back VAT paid on services and capital assets, not just on goods bought for resale, provided they hold valid VAT invoices.
- A longer zero-rated list. More supplies are taxed at 0%, which lets those sellers recover the VAT on their costs.
- E-invoicing. Large taxpayers moved to mandatory electronic invoicing from late 2025, and reports say medium and small VAT-registered businesses followed from January 2026.
- New systems. The NRS has moved from the old TaxPro Max platform to a new one called Rev360, which links to the CAC and NIMC databases to verify details.
How VAT Works: A Simple Example
VAT is charged on taxable goods and services at each stage, but the business collects it on the government’s behalf. Suppose you run a registered shop and sell goods for ₦100,000 before tax. You charge ₦7,500 VAT, so the customer pays ₦107,500. That ₦7,500 is your output VAT. If you paid ₦20,000 of VAT on goods and services you bought for the business, that is your input VAT. For the month you remit the difference: if your total output VAT was ₦75,000 and your input VAT was ₦20,000, you pay ₦55,000 to the NRS. If input VAT exceeds output VAT, you may be able to carry the excess forward or claim it, depending on the rules.
Who Must Register for VAT?
Anyone carrying on business and making taxable supplies in Nigeria is a taxable person and is expected to register. The difficulty is the small-business relief, because 2026 guides quote different figures:
- The Nigeria Tax Administration Act defines a small business as one with annual gross turnover of ₦100 million or less and total fixed assets below ₦250 million. Such businesses are reported to be exempt from company income tax and from filing VAT returns, although some professional services may be excluded.
- For VAT registration itself, many guides still cite the older ₦25 million turnover threshold, and others report ₦50 million under the new Act.
Because these figures conflict, do not assume you are exempt. Ask the NRS or an adviser which test applies to your business, especially if your turnover is between ₦25 million and ₦100 million or you provide professional services. Registration now runs through the NRS digital platform, so you will need your CAC details and a valid NIN. See our guides on registering a business name and verifying your NIN.
Zero-Rated, Exempt and Standard-Rated Supplies
These three categories are not the same, and mixing them up is a common and costly mistake.
- Standard-rated: most goods and services, taxed at 7.5%.
- Zero-rated: taxed at 0%, so you charge no VAT but you can still reclaim the VAT you paid on your costs. Reports list exports, basic food items, medicines, educational books and tuition among items treated this way under the new law.
- Exempt: no VAT is charged and you cannot reclaim input VAT, so that VAT becomes a cost. Certain financial and government services fall here.
Exact lists are set out in the law and some guides place the same item in different categories, so check the current schedule for the specific goods or services you sell.
How to Register, File and Pay
- Register on the NRS digital platform with your business and identity details.
- Charge VAT correctly. Issue valid VAT invoices that show your VAT registration details and the VAT charged. Follow the e-invoicing requirements that apply to you.
- Keep records. Keep invoices and supporting documents for at least six years.
- File monthly. Submit your return and pay any VAT due by the 21st of the following month. Registered businesses are generally expected to file even when they made no sales, with a nil return.
- Track withheld VAT. VAT that you withhold or self-account for has its own remittance deadline, reported as the 14th of the next month, so confirm it with the NRS.
Penalties for Getting VAT Wrong
2026 guides quote the penalties below. Older guidance cited lower late-filing amounts, so treat these as reported figures and confirm them with the NRS before you rely on them.
- Failure to register: ₦50,000 for the first month and ₦25,000 for each month after.
- Late filing: ₦100,000 for the first month and ₦50,000 for each month after, according to several guides.
- Late payment: 10% of the unpaid VAT plus interest at the CBN monetary policy rate.
- Failure to collect VAT: reported at 40% of the VAT not collected.
- E-invoicing breaches: reported at ₦200,000 per transaction plus the tax due.
Common VAT Mistakes Small Businesses Make
- Assuming VAT is optional until the NRS writes to you. Registration is a legal obligation once you are within scope.
- Assuming a small-business exemption applies without checking the turnover, fixed-asset and professional-services tests.
- Mixing up zero-rated and exempt supplies, which changes whether you can claim input VAT.
- Not keeping valid invoices, which means you cannot support an input VAT claim.
- Spending the VAT you collected. That money belongs to the government. Keep it separate so you can pay on the 21st.
- Filing late. The deadline is strict, and penalties start immediately.
VAT, Prices and Your Wallet
Even though the rate did not change, many Nigerians feel prices have risen. One reason is that more transactions, particularly digital ones, are now correctly capturing VAT that previously went unrecorded. For household budgets, see our guide on Nigeria’s cost of living in 2026, and for the bigger picture on payments see our guide to Nigeria’s cashless policy.
VAT Compliance Checklist
- Confirm with the NRS whether you must register, using your turnover, fixed assets and type of business.
- Register on the NRS platform and keep your registration details safe.
- Check which of your sales are standard-rated, zero-rated or exempt.
- Issue compliant VAT invoices, and follow e-invoicing rules if they apply to you.
- Record output VAT and input VAT every month, and keep all supporting invoices for six years.
- Set aside the VAT you collect in a separate account.
- File and pay by the 21st, and put a reminder in your calendar a week earlier.
- Review your position when your turnover grows, because a change in size can change your obligations.
What This Means for Freelancers and Online Sellers
Many people who earn online assume VAT does not apply to them. In reality, anyone supplying taxable goods or services as a business can fall within the rules, including online sellers, consultants and digital service providers, unless a small-business exemption clearly applies to them. If you sell through a platform, check whether the platform collects VAT for you or whether you are responsible. If you invoice clients directly, keep clear records of what you charged and why. Freelancers should also remember that VAT is separate from personal income tax and from the NIN-linked tax identity rules, so complying with one does not replace the others. When in doubt, a short session with a tax adviser costs far less than a penalty.
Frequently Asked Questions
What is the VAT rate in Nigeria in 2026?
7.5%. The 2025 tax reforms kept the standard rate unchanged.
Who administers VAT now?
The Nigeria Revenue Service (NRS), which replaced the Federal Inland Revenue Service in 2025 and took over under the new laws from 1 January 2026.
When is VAT due?
By the 21st of the month after the tax period. For example, VAT for January is due by 21 February.
Can I claim input VAT on services?
Yes. Under the Nigeria Tax Act 2025, input VAT is recoverable on services and capital assets as well as goods, if you hold valid VAT invoices.
Is my small business exempt from VAT?
It might be, but sources disagree on the thresholds. A business with turnover of ₦100 million or less and fixed assets under ₦250 million is reported to be exempt from filing VAT returns, while other guides cite ₦25 million or ₦50 million for registration. Confirm with the NRS.
Do I have to file a VAT return if I made no sales?
Registered businesses are generally expected to file a nil return. Check the current requirement with the NRS.
What happens if I file late?
Penalties apply, and 2026 guides report ₦100,000 for the first month and ₦50,000 for each month after, plus separate charges for late payment.
Related Guides
- How to register a business name in Nigeria
- 10 examples of small businesses that actually succeed
- Nigeria’s cost of living in 2026
- How to verify your NIN in Nigeria
Sources
- PwC Nigeria: The Nigerian Tax Reform Acts
- Baker Tilly Nigeria: Nigeria’s 2025 tax reform acts explained
- LawPadi: How to register for VAT in Nigeria
- Techpoint Africa: Nigerian tax reform acts 2026 explained for small businesses
- SimplVest: Understanding VAT under the new Tax Act 2025
- Keepam: VAT guide Nigeria 2026
- Stonehill Research: Nigeria VAT 2026, new rates, e-invoicing rules and what changed
- Wikipedia: Nigeria Revenue Service
