VAT 7.5% in Nigeria — rates, exemptions and returns
When 7.5% applies, what is zero-rated versus exempt, and how to file the monthly VAT 002 return correctly under the VAT Act and Finance Acts 2019-2024.
Nigeria operates a Value Added Tax (VAT) at a standard rate of 7.5%, raised from 5% by the Finance Act 2019 with effect from 1 February 2020 and confirmed by subsequent Finance Acts up to 2024. VAT applies to most supplies of goods and services consumed in Nigeria, with a registration threshold of NGN 25 million in annual turnover — businesses below this threshold are not required to register but may opt in voluntarily. Exports of goods and services are zero-rated (0%), and a sizeable list of essential supplies including basic food items, medical and pharmaceutical products, educational books and services, baby products and exported services are exempt or zero-rated. VAT returns are filed monthly on Form VAT 002 by the 21st of the following month.
- Standard rate 7.5% on most goods and services consumed in Nigeria.
- Threshold NGN 25 million turnover triggers compulsory VAT registration.
- Zero-rated 0%: exports of goods and services, certain agricultural supplies.
- Exempt: education, medical, pharmaceutical, financial and tuition services.
How it works
Determine whether you must register for VAT. If your annual taxable turnover exceeds NGN 25 million (threshold introduced by the Finance Act 2019 and confirmed in 2020), registration with FIRS is compulsory within six months of becoming liable. Below the threshold, registration is voluntary but recommended if you wish to recover input VAT on business purchases or invoice large customers who require VAT-bearing invoices.
Classify every supply correctly. Standard 7.5% is the default. Zero-rated (0%) applies to exports of goods and services with documentary proof (bill of lading, export proceeds, FX confirmation) and to specific items in the First Schedule to the VAT Act. Exempt supplies (no VAT charged, no input VAT recoverable) include basic foodstuffs, medical services, educational services, books and journals, pharmaceuticals and financial services — see the First Schedule for the full list.
Issue compliant tax invoices. Every taxable supply requires a tax invoice showing seller name, address and TIN, buyer name and TIN, invoice number and date, description of goods or services, VAT rate, VAT amount and gross total in NGN. Once FIRS MBS clearance is mandatory in your cohort, the invoice must also carry the IRN and QR code returned by the MBS platform.
File Form VAT 002 monthly. The return summarises output VAT (collected from customers) minus input VAT (paid to suppliers on creditable purchases), with the net amount payable to FIRS by the 21st day of the following month via TaxPro-Max. Late filing triggers a fixed penalty of NGN 50,000 in the first month and NGN 25,000 per month thereafter, plus interest on unpaid VAT at the CBN minimum rediscount rate plus 5%.
Maintain a VAT account and audit trail. Keep monthly schedules of output VAT, input VAT, zero-rated sales, exempt sales and adjustments. FIRS may conduct desk reviews or field audits at any time within the six-year statute of limitation. With FIRS MBS, cleared invoices automatically feed your output VAT schedule, reducing reconciliation work between the invoicing system and TaxPro-Max.
Legal framework
- Value Added Tax Act Cap V1 LFN 2004 (as amended).
- Finance Act 2019 (raised VAT rate from 5% to 7.5%, NGN 25m threshold).
- Finance Acts 2020, 2021, 2023 and 2024 (subsequent amendments).
- FIRS Information Circular 2020/02 on VAT rate increase.
Frequently asked questions
What is the difference between zero-rated and exempt for Nigerian VAT?
Zero-rated (0%) supplies are taxable but the rate is zero — the seller does not collect output VAT but may recover input VAT on related purchases. Exports and certain agricultural inputs are zero-rated. Exempt supplies are entirely outside the VAT system — no output VAT, but the seller also cannot recover input VAT on related purchases. Education, medical, pharmaceutical and financial services are exempt. The distinction matters significantly for input VAT recovery.
Do small businesses below NGN 25m turnover need to register?
No — the Finance Act 2019 introduced the NGN 25 million annual turnover threshold for compulsory VAT registration. Businesses below this level may register voluntarily, which can be useful if you have significant input VAT to recover or supply VAT-registered customers who expect a tax invoice. Once you cross the threshold in any twelve-month period, you must register with FIRS within six months.
How do I document zero-rated exports?
Keep a complete export file: signed export contract, commercial invoice marked 'Export — Zero Rated', bill of lading or airway bill, customs export entry (SGD), Form NXP from the Central Bank of Nigeria where applicable, and proof of FX repatriation. Without the full export documentation, FIRS will reassess the supply at 7.5% standard rate plus penalties and interest. Service exports also require the buyer's foreign address and proof of FX inflow.
When are VAT returns and payments due?
By the 21st day of the month following the supply month. For example, January transactions are reported and paid by 21 February. Returns are filed on Form VAT 002 through TaxPro-Max, with payment by remita or bank transfer to a FIRS-designated account. Even nil returns must be filed — failure to file attracts a NGN 50,000 penalty for the first month and NGN 25,000 for each subsequent month of default.
How does FIRS MBS interact with the VAT return?
Cleared MBS invoices carry an Invoice Reference Number (IRN) that ties the invoice to your TIN at FIRS. Once MBS is fully mandatory in your cohort, your output VAT schedule on TaxPro-Max will be pre-populated from cleared invoices, and your input VAT will be cross-checked against suppliers' cleared invoices in real time. This is a substantial reduction in manual reconciliation but also means uncleared invoices cannot be claimed as input VAT.