Explainer: VAT: How, when to file yours 

With Nigeria trying to boost non-oil revenue, Value Added Tax (VAT) compliance is becoming harder for businesses to ignore.

Businesses are required to file monthly returns even in periods of low activity or no sales, as the finance teams are expected to compute, remit, and report VAT correctly through the Nigerian Revenue Service (NRS) digital platform, TaxPro Max.

When misunderstood or ignored, VAT obligations can expose businesses to penalties, cash-flow strain, and audits, and for many small and medium-sized enterprises, the VAT filing process remains poorly understood.

Below is an overview of how VAT works in practice, who is required to file, and what businesses need to do to stay compliant.

What is VAT? 

VAT is a consumption tax charged at a rate of 7.5 percent on most goods and services supplied in Nigeria. Unlike company income tax, VAT is not a tax on profit.

Businesses act as a collection agent, charging VAT on sales and remitting it to the Federal Inland Revenue Service (FIRS).

Who files for VAT?

Businesses above the required threshold of N100 million are required to register and file VAT monthly.

Any business registered for VAT is required to file a VAT return every month, regardless of whether it made sales during that period.

Who does not file for VAT?

“Small businesses as defined by the NTAA, are exempt from charging VAT and filing VAT returns,” Olamide Olaniran, a senior tax adviser, explained in a LinkedIn post.

Under the law, small businesses are those with an annual turnover below N100 million.

Businesses that deal exclusively in VAT-exempt goods or services are also not required to charge VAT. However, tax advisers note that such businesses may still be expected to register and file nil returns where applicable.

Tax advisers note that a common mistake among small businesses is assuming that low turnover or lack of sales automatically exempts them from filing.

VAT exempt items

VAT-exempt items include basic food items, medical and pharmaceutical products, educational services, and certain financial services, as specified under the VAT Act.

How VAT filing works in practice

In practical terms, the process begins with proper invoicing. Businesses are required to issue VAT invoices that clearly show the VAT charged on each transaction. The VAT collected on sales is known as output VAT.

If a business pays VAT on purchases used to make taxable sales, it can claim that VAT back as input VAT. At the end of each month, the taxpayer computes the net VAT payable by offsetting input VAT against output VAT.

If output VAT exceeds input VAT, the difference is remitted to FIRS. Where input VAT exceeds output VAT, the taxpayer records a VAT credit, which may be carried forward in line with existing rules.

Tax professionals stress that VAT collections should be treated as funds held in trust for the government, not as business income.

Deadline for filing VAT 

According to Section 22(1) of the Nigeria Tax Administration Act (NTAA), VAT should be remitted monthly to the relevant tax authority.

“A taxable person shall, in respect of value added tax, with or without a notice, and whether or not an economic activity has taken place, submit a return to the Service in the prescribed form3 on or before the 21 st day of the following month”.

VAT returns are filed monthly through FIRS’ online platform, TaxPro Max. The deadline for filing and payment is on or before the 21st day of the month following the transaction month.

What are the VAT obligations of non-resident suppliers?

“Non-resident suppliers making taxable suppliers to Nigeria must register for VAT, charge VAT, and have VAT withheld by Nigerian recipients, unless appointed to correct directly,” explained Olaniran

This means Nigerian businesses transacting with foreign service providers may still have VAT obligations, even where the supplier has no physical presence in the country.

Steps involved in filing VAT

To file VAT, a taxpayer must log in to TaxPro Max using their Tax Identification Number (TIN), select the VAT return module, input sales and purchase figures for the period, and submit the return. Payment can be made electronically through the platform or via designated banks.

For businesses with no VATable transactions in a month, a nil return must still be filed. Failure to do so attracts the same penalties as non-filing.

FIRS has increasingly relied on its digital systems to track compliance, linking VAT filings with bank data, customs records, and other third-party information.

Penalties and enforcement

Under the law, failure to file VAT returns attracts a penalty of N50,000 for the first month of default and N25,000 for each subsequent month, in addition to interest on unpaid amounts. Persistent non-compliance may also trigger audits, assessments, and recovery actions.

In recent years, enforcement has become more data-driven, with FIRS focusing on sectors with high transaction volumes such as professional services, e-commerce, logistics, and hospitality.

According to analysts, this shift reduces the margin for informal practices that previously went undetected.

What businesses should watch out for

Businesses are advised to separate VAT collections from operating funds, maintain proper records, and reconcile VAT monthly rather than waiting until year-end. SMEs should engage a qualified accountant or tax adviser to reduce compliance risks.

As tax authorities deepen the use of technology and third-party data, VAT filing is becoming less about discretion and more about systems and discipline.

For Nigerian businesses, understanding how VAT works and filing on time is no longer optional, but a basic requirement of operating in an increasingly monitored tax environment.