Are you supposed to charge VAT on your invoices? How much is it? Who pays it? This guide explains everything Nigerian freelancers and small businesses need to know about VAT.
VAT — Value Added Tax — is one of the most misunderstood topics for Nigerian small business owners. Some charge it on every invoice, some never charge it, and many aren't sure whether they're supposed to. This guide cuts through the confusion and explains exactly what you need to know.
Value Added Tax (VAT) is a consumption tax levied on goods and services in Nigeria. It is administered by the Federal Inland Revenue Service (FIRS). The current VAT rate in Nigeria is 7.5%, introduced by the Finance Act 2019 (increased from the previous rate of 5%).
VAT is ultimately paid by the end consumer — your client. As a business, you collect VAT on behalf of the government and remit it to FIRS.
Under Nigerian law, businesses with an annual turnover of ₦25 million or more are required to register for VAT with FIRS and charge VAT on their invoices.
However, many small businesses below this threshold also charge VAT voluntarily — particularly when their clients are larger companies or government organisations that expect VAT-compliant invoices. If you're not VAT-registered, you should not include VAT on your invoices.
If you're unsure whether your business is required to register for VAT, consult a qualified accountant or contact FIRS directly.
Not all goods and services attract VAT in Nigeria. The following are exempt under the VAT Act:
Basic food items (unprocessed), medical and pharmaceutical products, educational materials, baby products, agricultural equipment and products, exported services (services rendered to clients outside Nigeria).
If your business provides any of these exempt services, you should not charge VAT even if you are VAT-registered.
A VAT-compliant invoice in Nigeria should clearly show the subtotal (amount before VAT), the VAT amount (7.5% of the subtotal), and the total amount due (subtotal plus VAT).
For example, if you charge ₦100,000 for a service, your invoice should show:
Subtotal: ₦100,000
VAT (7.5%): ₦7,500
Total: ₦107,500
Your VAT registration number (TIN) should also appear on VAT-compliant invoices.
Invoiciti makes VAT calculation completely automatic. When creating an invoice, simply toggle VAT on — Invoiciti instantly calculates 7.5% of your subtotal, shows the VAT amount separately, and displays the correct total. No manual calculations, no errors.
The VAT breakdown appears clearly on the invoice your client receives, making it fully compliant and professional. You can toggle VAT on or off for each individual invoice depending on whether the service is VATable.
If you are registered for VAT, yes. VAT-registered businesses in Nigeria are required to file monthly VAT returns with FIRS and remit the VAT collected to the government by the 21st of the following month.
For example, VAT collected in July must be filed and remitted by 21st August. Failure to remit VAT on time attracts penalties and interest from FIRS.
If you are not VAT-registered, you do not need to remit VAT — and you should not be charging it on your invoices.
Track your annual turnover carefully. If you're approaching ₦25 million in annual revenue, start preparing to register for VAT before you cross the threshold.
Keep records of all VAT collected. Your Invoiciti dashboard tracks all your invoiced amounts — this makes it easier to calculate your VAT liability each month.
Work with an accountant. VAT compliance in Nigeria has nuances — especially around input VAT (VAT you pay on business expenses that can be offset against VAT you collect). A qualified accountant can save you money and keep you compliant.
Don't charge VAT if you're not registered. Charging VAT without being registered is illegal and can result in penalties from FIRS.
Whether you're VAT-registered or not, Invoiciti makes it easy to create professional, accurate invoices. Toggle VAT on when needed and the calculation is done for you automatically. Create your free account and send your first invoice in under 2 minutes.
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