HausaDaily News

Economy & Money

VAT in Nigeria: What You Pay and What Changed in 2026

Four tax acts commenced on 1 January 2026. The rate did not change — almost everything around it did.

By Hausa Daily News Editorial Desk · · 3 min read

Value Added Tax is charged on most goods and services at each stage of production, with businesses reclaiming the tax they paid on their own inputs. The consumer at the end of the chain bears it.

Nigeria's rate is 7.5%, and it did not change in the 2026 reform. A proposed phased rise to 15% by 2030 was dropped after consultation.

The four acts

All four were signed on 26 June 2025 and commenced on 1 January 2026:

  • Nigeria Tax Act 2025
  • Nigeria Tax Administration Act 2025
  • Nigeria Revenue Service (Establishment) Act 2025 — under which the Federal Inland Revenue Service becomes the Nigeria Revenue Service
  • Joint Revenue Board (Establishment) Act 2025

Exempt versus zero-rated, and why it matters

This distinction sounds technical and has real consequences.

An exempt supply carries no VAT, but the supplier also cannot reclaim the VAT it paid on its own inputs. That unrecovered tax gets built into the price. The consumer pays it invisibly.

A zero-rated supply is taxable at 0%, and the supplier can reclaim input VAT. The tax genuinely comes out of the price.

From 1 January 2026, basic foodstuffs, medical supplies and educational materials moved from exempt to zero-rated. In principle that should reduce prices in those three categories, because suppliers can now recover input tax rather than passing it on.

What else changed on 1 January 2026

  • Exports are zero-rated.
  • Petroleum products, CNG, LPG, other gaseous hydrocarbons and renewable energy equipment are VAT-suspended.
  • Diplomatic purchases moved to exempt.
  • Input VAT is now claimable on services and fixed assets used for taxable supplies — previously restricted — with claims allowed within five years, for supplies from 1 January 2026.
  • Mandatory e-invoicing and fiscalisation, with a registration number and sequential invoice numbering.
  • Excess input VAT refund claims must be made within 12 months, and the Nigeria Revenue Service must process them within 30 days.
  • Non-resident digital platforms must collect VAT on the full value of the supply.

The small business threshold

Businesses with turnover of ₦100 million or less and fixed assets not exceeding ₦250 million fall outside VAT registration and compliance entirely. Professional service providers are excluded from this relief.

This is the single change most likely to affect a small trader or workshop. Below those thresholds, there is no VAT registration, no VAT filing, and no VAT charged.

Beyond VAT

Three further changes in the same package are worth knowing:

Personal income tax bands were restructured to run from 0% to 25%. The consolidated relief allowance was replaced with a rent relief of 20% of rent paid, capped at ₦500,000.

Capital gains are now folded into personal income tax rates rather than charged at a flat 10%.

A unified 4% development levy on assessable profits replaces a stack of earmarked taxes — the tertiary education tax, the NITDA levy, the NASENI levy and the Police Trust Fund levy, which together came to roughly 4.25%. Small companies and non-resident firms are excluded. The proceeds are shared, with TETFund receiving 50% and the Nigerian Education Loan Fund 15%.

What this means in a market in Kano

If you run a small shop with turnover under ₦100 million, the practical answer is: less paperwork, and no VAT obligation.

If you buy food, medicine or school materials, the zero-rating should ease prices over time, though how much reaches the shelf depends on competition in the supply chain.

If you are a larger business, the ability to reclaim input VAT on services and fixed assets is a genuine cash-flow improvement, offset by the compliance cost of mandatory e-invoicing.

Frequently asked questions

Did VAT go up to 15%? No. The proposed phased increase was dropped. The rate is 7.5%.

Is FIRS still called FIRS? It became the Nigeria Revenue Service under the 2025 Act.

Do I charge VAT if my turnover is ₦80 million? Not if your fixed assets are also within ₦250 million and you are not a professional service provider. You fall outside VAT registration.

Sources

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