Nigerian VAT is now governed by the Nigeria Tax Act, 2025 (NTA 2025) and Tax Administration Act, 2025, both of which took effect on 1 January 2026 after the Value Added Tax Act ceased to apply after 31 December 2025. The NTA introduces several important changes to the VAT framework, including the expanded input VAT deductions and exemptions, an electronic invoicing system, a surcharge on fossil fuels and revised compliance requirements. The standard VAT rate remains at 7.5%.
The scope of recoverable input VAT has been broadened to allow input VAT deductions on services and fixed assets provided they relate to taxable supplies. Under the NTA 2025, input VAT incurred by a registered person on any taxable supply—including services and fixed assets—may be offset against output VAT, but only to the extent the input VAT is attributable to the use, consumption or supply of taxable outputs. Previously, only VAT on goods sold and materials used in producing taxable supplies was creditable.
This expansion significantly enhances input VAT recovery for manufacturers/traders and, importantly, allows service providers—who previously expensed all input VAT—to offset such VAT against output VAT collected.
The list of VAT-exempt goods and services has been expanded to make certain essential items more affordable for final consumers. New exemptions include oil and gas exports, assistive devices and disability-related products. Zero-rated items include basic food, education materials, power generation and transmission, medical services and equipment, electric vehicles, parts and semi-knocked down parts, and agricultural products. Although water is generally considered a basic food item, it is subject to VAT when sold in restaurants, hotels, eateries, lounges, cafes, canteens and similar settings, as well as when sold by contractors, caterers and similar providers.
Expenses on which VAT is due but not charged, or expenses relating to imported items for which the applicable import duty or levy has not been paid, are not deductible for tax purposes. Taxpayers should be sure they are in full compliance with VAT remittance and import duty/levy obligations to minimise exposure.
Where VAT due on an asset was not charged, the related expenditure will not qualify as eligible qualifying capital expenditure. Similarly, if import duty or levy was not paid on an imported asset, the expenditure will not qualify for capital allowances. The Nigerian tax authorities, the National Revenue Service (NRS, previously known as the Federal Inland Revenue Service) will verify VAT, duty or levy remittances before allowing capital allowance claims on such assets.
The NTA introduces a 5% surcharge on chargeable fossil fuel items produced or supplied in Nigeria, subject to certain exemptions. The surcharge does not apply to:
The NTA 2025 introduces several compliance-related changes:
Gideon Adewale
BDO in Nigeria
Input VAT on Services and Fixed Assets
The scope of recoverable input VAT has been broadened to allow input VAT deductions on services and fixed assets provided they relate to taxable supplies. Under the NTA 2025, input VAT incurred by a registered person on any taxable supply—including services and fixed assets—may be offset against output VAT, but only to the extent the input VAT is attributable to the use, consumption or supply of taxable outputs. Previously, only VAT on goods sold and materials used in producing taxable supplies was creditable.This expansion significantly enhances input VAT recovery for manufacturers/traders and, importantly, allows service providers—who previously expensed all input VAT—to offset such VAT against output VAT collected.
VAT Exempt/Zero-Rated Goods and Services
The list of VAT-exempt goods and services has been expanded to make certain essential items more affordable for final consumers. New exemptions include oil and gas exports, assistive devices and disability-related products. Zero-rated items include basic food, education materials, power generation and transmission, medical services and equipment, electric vehicles, parts and semi-knocked down parts, and agricultural products. Although water is generally considered a basic food item, it is subject to VAT when sold in restaurants, hotels, eateries, lounges, cafes, canteens and similar settings, as well as when sold by contractors, caterers and similar providers.
Disallowed Deductions
Expenses on which VAT is due but not charged, or expenses relating to imported items for which the applicable import duty or levy has not been paid, are not deductible for tax purposes. Taxpayers should be sure they are in full compliance with VAT remittance and import duty/levy obligations to minimise exposure.Where VAT due on an asset was not charged, the related expenditure will not qualify as eligible qualifying capital expenditure. Similarly, if import duty or levy was not paid on an imported asset, the expenditure will not qualify for capital allowances. The Nigerian tax authorities, the National Revenue Service (NRS, previously known as the Federal Inland Revenue Service) will verify VAT, duty or levy remittances before allowing capital allowance claims on such assets.
Surcharge on Fossil Fuels
The NTA introduces a 5% surcharge on chargeable fossil fuel items produced or supplied in Nigeria, subject to certain exemptions. The surcharge does not apply to:
- Clean or renewable energy products;
- Household kerosene;
- Compressed natural gas; and
- Cooking gas.
Compliance
The NTA 2025 introduces several compliance-related changes:
- Small companies are exempt from filing monthly VAT returns. As a result, they cannot issue VAT-inclusive invoices or withhold VAT charged on invoices for goods and services. They may, however, opt out of the exemption and charge VAT on taxable supplies and file VAT returns.
- VAT withheld at source must be remitted to the NRS no later than the 14th day of the following month.
- Input VAT refunds are available for un-utilized input VAT. The NRS may request any information it deems necessary before issuing a cash refund. The NTA 2025 does not specify the type of information that may be requested, giving the NRS discretion in this area. Previously, the NRS carried out special tax audits on taxpayers to establish any tax liability before issuing a refund. Refund requests must be made within 12 months after the relevant transaction and approved refunds must be issued within 30 days.
- An Electronic Fiscal System will be introduced to record taxable supplies and, to this end, the NRS has intensified efforts on the deployment of an e-invoicing system that would apply to taxpayers with turnover of NGN 5 billion and above. The NRS has also put in place plans to apply an e-invoicing system to taxpayers with turnovers below NGN 5 billion.
Gideon Adewale
BDO in Nigeria