VAT is a consumption tax borne by the final consumer but collected and remitted by businesses. Getting the mechanics right protects both your cash flow and your compliance record.
The rate and who registers
VAT is charged at 7.5% on the supply of goods and services in Nigeria. Every company is required to register for VAT on incorporation. Businesses with annual turnover of ₦25 million or less are relieved of the obligation to charge and remit VAT, but they must still register and file.
Exempt and zero-rated supplies
Exempt items include basic food items, medical and pharmaceutical products, educational materials and services, baby products and certain agricultural equipment. Exports are zero-rated, which means the supply is taxable at 0% and related input VAT may be recoverable.
Input and output VAT
Output VAT is what you charge customers; input VAT is what you pay suppliers. You remit the difference. Input VAT on overheads, services and fixed assets is generally not recoverable in Nigeria — it is expensed or capitalised — so only input VAT on goods purchased for resale or used directly in production is typically claimable.
Filing and penalties
Returns are filed monthly by the 21st of the following month, including nil returns. Failure to register, failure to file and failure to remit each attract separate penalties plus interest on the outstanding amount, so a dormant company should keep filing nil returns rather than going silent.
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