The value added tax (VAT) rate in Nigeria is seven point five percent (7.5%). However, the VAT rate cannot be applied to all transactions. Why? Some goods and services are either zero-rated or exempt from VAT. In such instances, the standard VAT rate in Nigeria of 7.5% will not apply to these items. Therefore, it is ideal to review the nature of transactions to determine whether VAT will be applicable.
Examples of goods exempt from VAT are;
- Basic food items
- Medical products
- Educational materials
- Interest in land and building, money, or security
- Agricultural animal feeds and chemicals made in Nigeria
- Agricultural products
- Oil exports
- Petroleum products
- Baby products and raw materials for producing baby diapers
- Sanitary towels, pads, and tampons made in Nigeria
- Renewable energy equipment
The following are examples of services exempt from VAT in Nigeria
- Medical services
- Exported services
- Commercial airline fare
- Lease or rent for personal accommodation. It excludes corporate accommodation.
- Tuition of Nigeria’s educational system (6-3-3-4)
Examples of zero-rated goods and services in Nigeria are
- Non-oil export
- Goods and services purchased by diplomats
- Goods purchased for humanitarian donor-funded projects
Click here to see the full list of exempt and zero-rated items in BRC’s VAT guide in Nigeria.
When to include VAT on invoices to customers
A taxpayer can include VAT on the supply of taxable goods and services invoice to customers after registering with the Federal Inland Revenue Service (FIRS). More details on how to register for tax with FIRS is available in this link.
Failure to register for VAT has a penalty of fifty thousand naira (NGN50,000) for the first month of default and twenty-five thousand naira (NGN25,000) each for other months.
FIRS will issue a taxpayer identification number (TIN) when a taxpayer is duly registered. Then, invoice(s) to customers will show the TIN, price, VAT rate and VAT payable, and total amount payable.