VAT is the tax that trips up the most service companies. It isn't your money, it's due every month, and until recently service businesses could rarely claim back the VAT they paid. The 2026 rules fixed that last part. Here's how VAT works now.
What is VAT and what is the rate in Nigeria?
Value Added Tax (VAT) is a 7.5% tax on the supply of most goods and services in Nigeria. As a VAT-registered company, you add 7.5% to your invoices, collect it from clients and pay it to the Nigeria Revenue Service (NRS). The rate did not change in 2026.
Does my company have to charge VAT?
Most companies do. The exception is a small company under the Nigeria Tax Act 2025: turnover of ₦100m or less, fixed assets of ₦250m or less, and no professional services. Small companies are exempt from registering for, charging and filing VAT, but they can opt in.
If you bill large companies, banks or government agencies, expect them to ask for VAT invoices with your TIN. See small company tax exemption for the full test.
How do output VAT and input VAT work?
- Output VAT is the VAT you charge clients on your invoices.
- Input VAT is the VAT you pay suppliers on your business costs.
- VAT payable = output VAT − input VAT for the month.
Worked example: a digital agency's month
| Net amount | VAT (7.5%) | |
|---|---|---|
| Invoices issued to clients | ₦12,000,000 | ₦900,000 output VAT |
| Software subscriptions (with VAT invoices) | ₦800,000 | ₦60,000 input VAT |
| Equipment purchase | ₦2,000,000 | ₦150,000 input VAT |
| Freelance design (supplier VAT invoice) | ₦600,000 | ₦45,000 input VAT |
| VAT to pay the NRS | ₦900,000 − ₦255,000 = ₦645,000 |
Can service companies claim input VAT now?
Yes, and this is the biggest VAT change of 2026. Under the old rules, input VAT on services and fixed assets was largely not recoverable. The Nigeria Tax Act 2025 allows input VAT on all purchases, including services and fixed assets, as long as it relates to supplies you make that are subject to VAT.
To claim it you need:
- A valid VAT invoice from the supplier, showing their TIN and the VAT amount.
- A clear link between the cost and your taxable business.
- Records kept in a form the NRS can inspect.
Tip: Record the VAT amount separately when you log each expense. At month end, that's your input VAT total.
When is VAT due?
VAT returns and payment are due by the 21st day of the month after the month you invoiced. VAT for September is due by 21 October.
VAT is generally due when you issue the invoice (or receive payment, if earlier), not when the client finally pays. If a client takes 60 days to pay, you may already have paid the VAT on that invoice. This is one of the most common cash-flow shocks for agencies, and a good reason to get paid on time.
What should a VAT invoice include?
- The words "Invoice" or "Tax invoice", a unique number and the date
- Your company name, address and TIN
- The client's name and address (and their TIN for B2B supplies)
- A description of the services, the net amount, the VAT rate and the VAT amount shown separately, and the total
See our full professional invoice checklist.
What about e-invoicing?
The NRS is rolling out mandatory e-invoicing through its Merchant-Buyer Solution (MBS), starting with large taxpayers. Published timelines put medium taxpayers (₦1bn–₦5bn turnover) live from July 2026 with enforcement from January 2027, and smaller taxpayers live from July 2027. Most SMEs have time, but invoices should already be clean, numbered and consistent.
Need a quick figure? Use the free VAT calculator to add or remove 7.5% VAT.
How BizBooks handles VAT
Add VAT to any invoice with one tap. BizBooks records output VAT when you issue the invoice, lets you log input VAT on expenses and bills, and shows VAT for the month and the date it's due on your tax calendar. The VAT report lists every invoice and expense for your return.
Frequently asked questions
What is the VAT rate in Nigeria in 2026?
7.5%. The Nigeria Tax Act 2025 did not change the rate.
When is VAT filed in Nigeria?
By the 21st day of the month following the month of the supply, both the return and the payment.
Can I claim VAT on software subscriptions and laptops?
Since 2026, yes, if you have valid VAT invoices and the costs relate to your VAT-able supplies. Input VAT on services and fixed assets is now recoverable.
Do I pay VAT before my client pays me?
Often yes. VAT is generally due based on when you issue the invoice, so slow-paying clients can leave you paying VAT on money you haven't received yet.
Are small companies exempt from VAT?
Yes. Small companies (turnover up to ₦100m, fixed assets up to ₦250m, no professional services) are exempt from charging VAT, but can choose to register.