What is VAT?
Value Added Tax (VAT) is a tax imposed on the supply of goods and services. Under Nigerian law, the tax is charged at 7.5% of the value of the taxable goods and services.
Despite a lot of speculation during the 2025 tax reform debates, the rate did not go up. It remains 7.5% — one of the lowest in the region.
What has changed is the law behind it. 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. Between them they repealed the old Value Added Tax Act and replaced the Federal Inland Revenue Service (FIRS) with the Nigeria Revenue Service (NRS). So while the tax itself looks familiar, almost everything around it — registration, filing, exemptions, invoicing — now works differently.
How the maths actually works
Here is the simple version. If you sell shoes for N10,000, the VAT chargeable is 7.5% of the value — N750 — so you sell to the public for N10,750, keep the N10,000, and account for the N750.
But that is not the whole story, and the difference matters to your cash flow. The N750 you charge your customer is your output VAT. The VAT you yourself paid on business purchases is your input VAT. You only remit the difference. If you paid N400 of VAT on the leather, the packaging and the services that went into those shoes, you remit N350, not N750.
This is one of the most significant improvements under the new law. Input VAT recovery used to be tightly restricted. Under the Nigeria Tax Act you can now claim input VAT on goods, services and fixed assets used in your business — so a manufacturer can offset the VAT paid on machinery, not just raw materials. If your input VAT exceeds your output VAT in a period, you can apply for a refund.
Who needs to register for VAT?
If you make taxable supplies in Nigeria, you are a taxable person and you must register. A taxable person who fails to register by the due date is liable to a fine of N50,000 for the first month of default and N25,000 for each subsequent month.
In practice, if your business is registered with the CAC, registration is now largely automatic — your Tax ID is linked to your CAC registration number, and VAT registration follows from being in the tax system rather than being a separate expedition to a tax office. (See our article on how to get your Tax ID for the retrieval steps.)
Under the Nigeria Tax Administration Act, a “small business” — one with gross turnover of N100 million or less per annum and total fixed assets below N250 million — is exempt from filing VAT returns, whether or not it has commenced economic activity.
Any business providing professional services is expressly excluded from the small business definition. Lawyers, accountants, consultants, engineers, architects and similar professionals must register and file regardless of turnover. Being small does not save you if you are professional.
What is exempt, and what is zero-rated?
Zero-rated means you charge your customer 0% VAT, but you can still reclaim the input VAT on what you bought to make the supply. Exempt means no VAT at any stage — and you cannot reclaim your input VAT, so it becomes a real cost buried in your prices.
The Nigeria Tax Act moved several categories that used to be merely exempt into the zero-rated column, which is a genuine benefit to businesses in those sectors. Zero-rated supplies now include basic food items, medical and pharmaceutical products, educational books and materials, and electricity generated and supplied to the national grid or transmitted to the distribution companies.
Exempt supplies now include healthcare services, education services, passenger road transport, rent on residential accommodation, petroleum products, renewable energy equipment, CNG and LPG, baby products, sanitary pads, and military hardware and uniforms supplied to the armed forces and security agencies. Agricultural inputs such as fertiliser, seeds, veterinary medicine, tractors and farm implements are either exempt or zero-rated depending on the item, and exports remain outside the net.
If your business supplies anything in these categories, check which column it falls into before you set your prices or file your first return. Charging VAT on a supply that should be zero-rated, or failing to charge it on a taxable one, creates problems on both sides of the transaction.
How do you register for VAT?
You no longer need to visit a tax office with a folder of photocopies. The old process — VAT form 001, CAC2 and CAC7, originals for sighting, one copy stamped as proof — belongs to a system that no longer exists. CAC2 and CAC7 were themselves retired under CAMA 2020.
Registration now runs through the NRS digital platforms. The Service has moved from the old TaxPro Max system to Rev360, which connects directly to the CAC and NIMC databases and verifies your details automatically. Start at the NRS self-service portal, confirm your Tax ID against your CAC registration number, and complete your VAT registration there. Most of the process is fully digital; physical visits are now the exception, reserved for verification problems.
Registering for VAT is FREE.
You do not have to pay any fees, and you do not need to employ anyone to do it on your behalf. If someone asks you to pay for VAT registration, that is a scam.
Where your CAC records are clean and match your details, registration is quick — a matter of minutes online. Where there is a mismatch between your CAC and NIMC data (a name spelt differently, a wrong RC number), you will need to resolve that first, which is where most delays now come from.
After you register
Registration is the beginning, not the end. Two ongoing obligations catch people out.
VAT returns are due on or before the 21st day of the month following the period, whether or not you traded that month. VAT you have collected, withheld or self-accounted for is to be remitted by the 14th day of the succeeding month. Failure to file attracts a penalty of N100,000 for the first month and N50,000 for each subsequent month it continues. If you qualify as a small business as described above, the filing obligation does not apply to you.
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We hope you have found this information helpful. Please note that this information is provided for general informational purposes only and is not intended to be legal advice. No lawyer-client relationship is formed nor should any such relationship be implied. It is not intended to substitute for the advice of a qualified lawyer. If you require legal advice, please consult with a qualified lawyer.