What Is VAT in Nigeria

Value Added Tax (VAT) is a consumption tax levied at 7.5% on taxable goods and services supplied in Nigeria. Businesses collect VAT from customers at point of sale, then remit collected amounts to FIRS after deducting VAT paid on business purchases (input VAT).

The Nigerian VAT Act sets a threshold of ₦25 million annual turnover for VAT registration, meaning businesses earning ₦25 million and above must register for VAT with FIRS and charge 7.5% VAT on taxable supplies.

Does My Small Business Need to Be VAT Registered

Does my small business need to be VAT registered? Businesses earning ₦25 million and above must register for VAT, while businesses below ₦25 million turnover are exempt from VAT registration but can voluntarily register.

Calculate your annual turnover by totaling all sales revenue from taxable supplies over 12 consecutive months. Once you cross ₦25 million, registration becomes mandatory within six months.

Voluntary registration benefits businesses below the threshold wanting to claim input VAT credits on expenses or enhance credibility with larger clients requiring VAT-registered vendors.

Who Is Exempted from VAT in Nigeria

Who is exempted from VAT in Nigeria? Certain goods and services don’t attract VAT charges:

Exempt goods include basic food items, medical products, locally produced agricultural products, books and educational materials, and baby products.

Exempt services cover medical services, educational services, and rent on residential properties.

Zero-rated items apply 0% VAT but allow input VAT claims, primarily exported goods and services.

How to Get VAT ID in Nigeria: Registration Process

How to get VAT ID in Nigeria requires systematic steps through FIRS. Online VAT registration for small business in Nigeria starts on the official FIRS website (firs.gov.ng).

Registration Requirements:

• Tax Identification Number (TIN)

• Certificate of Incorporation or Business Registration

• Utility bill as proof of address

• Formal application letter to FIRS

• Valid ID for proprietors

Step 1: Obtain TIN if you don’t have one through vat registration portal at firs.gov.ng

2: Complete Form 001 with accurate business details

3: Submit documents online or at nearest FIRS office

4: Wait for approval (typically 1-2 weeks)

5: Receive VAT registration certificate with your VATIN

Registering for VAT is FREE – you don’t need to pay fees or engage third parties, though many choose professional assistance.

Is VAT and TIN Number the Same in Nigeria

Is VAT and TIN number the same in Nigeria? Yes, VAT number is the same as FIRS Tax Identification Number (TIN). Your TIN serves as your VAT identification number once registered.

How Do I Calculate VAT for My Business

How do I calculate VAT for my business? Calculation involves determining output VAT (collected from customers) and input VAT (paid on purchases), then remitting the difference to FIRS.

Example:

• Sales: ₦5,000,000

• Output VAT (7.5%): ₦375,000

• Purchases: ₦2,000,000

• Input VAT (7.5%): ₦150,000

• VAT Payable: ₦375,000 – ₦150,000 = ₦225,000

Filing and Compliance Requirements

Section 14(3) of the VAT Act mandates all VAT collection agents file returns by the 21st day of the month following transactions.

Monthly obligations:

• File VAT returns by 21st of following month

• Remit net VAT payable to FIRS

• Maintain proper records of all transactions

• Issue VAT-compliant invoices showing VAT breakdown

Penalties for non-compliance: ₦50,000 for first month of non-registration, ₦25,000 for each subsequent month, plus 10% penalty on unpaid tax and possible criminal prosecution.

How The SME Mall Ensures VAT Compliance

VAT registration and ongoing compliance require understanding complex regulations, accurate calculations, timely filings, and proper record-keeping that overwhelm busy business owners.

Our Accounting & Finance services handle complete VAT management including registration, monthly return filing, input/output VAT tracking, and compliance monitoring.

Our Legal Services ensure proper business structure, VAT registration documentation, and regulatory compliance protecting against penalties.

Register Before It’s Too Late

Once business crosses ₦25 million threshold, you must notify FIRS and start charging VAT – failure to comply results in penalties.

Don’t wait for tax authorities to discover non-compliance. Register proactively, maintain proper records, and file returns on time.

Ready for proper VAT registration and compliance? Contact The SME Mall today for expert guidance ensuring legal operation and penalty-free growth.