How Much Is VAT Rate In Nigeria? Understand And Learn It Here
Knowing the VAT rate in Nigeria is not only the responsibility of all businesspeople trading in the country. Regular customers should know the regulation regarding value-added tax and how it applies. Understanding the regulation on VAT will help you when it’s your turn to be a business person. As it also helps to avoid any penalties.
Why Does Nigeria Have a Value Added Tax (VAT)?
Like many countries, Nigeria has a Value-Added Tax or VAT on products or services that Nigerians receive. It means, if you’re a businessman and want to sell your product in Nigeria, you must comply with the regulation and add the VAT on your products.
The VAT rate in Nigeria used to be 5% flat off the item or service’s price. But effective in 2020, the Nigerian government raise the tax to 7.5%.
Who Pays VAT in Nigeria?
In short, as a businessman, you charge VAT to your Nigerian customers. If you’re selling directly to the customer, or it’s a B2C service, you must include the VAT in the invoice you give them. But if you’re doing business with another business or a B2B service, you don’t have to charge them because they will do the necessary paperwork.
How to Register for VAT
It doesn’t matter if your business has an office in Nigeria or you base your service in another country. You must register with the Federal Inland Revenue Service, the Nigerian agency responsible to collect the tax. They have thorough information on their website to help you get through the registration process.
One thing you should know is that you don’t need to have a local representative. So if you’re a small business from another country, you still comply with the Nigeria regulation.
Collecting and Exemptions
As you know, you’re only responsible to charge the 7.5% VAT to the customers who purchase your services. After registering with the FIRS, you will receive a business VAT number. As proof that you’re following the regulation, your invoice must include the following information, or you must pay up to 50% of each item.
– Your Business Name and Address
– VAT registration number
– Invoice Date and Sequence
– Detailed information about the product or service including the price before tax.
– VAT rate on each item
– Total amount including VAT
Several products and services are exempt from VAT such as the goods and services for humanitarian donor projects, or items bought abroad by diplomats. And in case a Nigerian bought an item in the duty-free store in the airport. The item is also exempt from VAT.
Value-Added Tax or VAT rate in Nigeria is 7.5% for all goods and services. As the business owner, you are responsible to include tax in the final price you charge your customers. To do so, you must register with the Federal Internal Revenue Service, FIRS, and include your business name and tax registration number in the invoice. Nigeria’s government put 21 days for all businesses to file and pay the VAT. Failing to do so will incur a large penalty for your business.
