VAT Under The NTA 2025: What Digital Platforms And Fintechs Need To Know

Understanding VAT has become vital for digital businesses operating in Nigeria. Under the Nigerian Tax Act 2025 (NTA 2025), VAT remains a consumption tax charged on most goods and services, and it is administered by the Nigerian Revenue Service (NRS). For founders, operators, and investors across e-commerce, fintech, logistics, SaaS, and marketplace ecosystems, the latest reforms reshape compliance obligations in practical ways.

In our first edition of the "Tax and Tech" Series, we unpacked the broader impact of the NTA 2025 on startups and briefly touched on VAT. In this edition, we go deeper. This edition of the Tax & Tech Series breaks down what the new VAT rules mean for your operations, how to stay compliant, and where the new opportunities lie.

What Counts as a Taxable Supply?

VAT only applies when a transaction qualifies as a taxable supply. If a good or service is not exempt or zero-rated, it is subject to VAT at the rate of 7.5% under the NTA 2025.

A supply is considered taxable when any of the following conditions are met:

• Goods are located in Nigeria at the time of supply, or when a Nigerian taxable person holds exercisable rights over those goods in Nigeria.
• Services are provided to, consumed by, or otherwise enjoyed by a person in Nigeria, regardless of whether the supplier is based outside the country. This also covers services connected to property located in Nigeria.
• Intangible property (such as IP or other intangible rights) is exploited in Nigeria, registered or assigned to a person in Nigeria, or linked to a tangible or immovable asset situated in the country.

In practical terms, if goods, services, or intangible rights are used, consumed, exploited, registered, or connected to property in Nigeria, they are VAT-able.

An Example

A Nigerian graphic designer licenses a custom stock image to a local business through a digital marketplace app. In this transaction, the VAT rate of 7.5% would apply to each fee component or category of fees involved:

• The platform's listing/subscription fee/commission paid by the graphic designer (if any);
• The licensing fee for the stock picture/video paid by the end user; and
• The payment processing fee charged in the transaction.

Who Must Register for VAT?

For Non-Resident Digital Service Providers: Any non-resident business that supplies taxable goods or services to customers in Nigeria is required to register for VAT in Nigeria. This obligation applies to all forms of digital or electronically supplied services, including cloud hosting, streaming, software, e-commerce platforms, and other digital products. Such suppliers must charge VAT on their invoices and comply with Nigerian VAT filing and remittance requirements.

For Resident Businesses: All resident businesses that make taxable supplies must register for VAT, charge VAT, file monthly VAT returns, and remit VAT collected. The turnover threshold used for Corporate Income Tax, Capital Gains Tax, and the Development Levy does not apply to VAT. Even small companies must comply with VAT obligations where they make taxable supplies. Late filing attracts administrative penalties that increase each month until compliance.

Who Ultimately Pays or Remits VAT?

For Non-Resident Suppliers: When a non-resident supplier provides taxable supplies into Nigeria, the default rule is that the Nigerian customer withholds and remits the VAT to the tax authority. However, the tax authority may appoint the non-resident or an intermediary to collect and remit VAT directly. When appointed, a non-resident supplier becomes responsible for charging and remitting VAT to the tax authority.

Digital Platforms and Marketplaces: Digital platforms and marketplaces may be directed to collect VAT on transactions carried out through their systems. This responsibility can extend to the full value of the transaction, not just the platform's commission, where the platform has been designated as a VAT collection agent. When the customer is a government ministry, department, agency, or another entity specifically authorised to withhold VAT, that customer must withhold and remit the VAT regardless of whether the supplier or platform is resident or non-resident.

Expanded Input VAT Recovery and Zero-Rated Transactions

The NTA 2025 broadens what businesses can claim as input VAT. Businesses may now claim input VAT on both services and fixed assets, provided these costs relate to making taxable supplies. At the same time, the list of zero-rated supplies has been expanded to cover exported services and intangible assets (including digital assets). This creates two important outcomes for businesses:

• VAT is not charged on qualifying foreign-facing supplies; and
• Because these supplies are zero-rated (not exempt), businesses can recover the VAT paid on their costs (e.g., cloud tools, third-party software, consultants, infrastructure, etc.), as long as the claim is made within 5 years from the end of the period in which the VAT was incurred.

Input VAT can only be recovered when VAT was actually charged, and the cost relates to making taxable supplies. If no VAT was charged on a cost, there is no input VAT to claim. When an expense supports both taxable and non-taxable activities, only the portion tied to taxable supplies is recoverable, and claims must be made within the allowed time frame.

Mandatory E-Invoicing (Fiscalisation)

VAT-registered businesses may be required to issue invoices through an approved e-invoicing or fiscalisation system that validates invoices in real time. This system is part of the tax authority's digital compliance framework and aims to improve accuracy, transparency, and auditability of VAT reporting.

A pilot phase is already in place for digital suppliers, starting with companies with N5 billion (N5,000,000,000) and more in annual turnover. Sectors included in the pilot include:

• crypto exchanges and wallet apps
• digital advertising and marketing platforms
• SaaS and other subscription-based services
• payment processors and checkout infrastructure
• platforms offering tokenized investments with fiat conversions or digital goods.

As fiscalisation expands, businesses should prepare for eventual integration, as the system is expected to become a core compliance requirement.

Conclusion

The NTA 2025 shifts VAT from a back-office concern to a core operational requirement. For founders, the priority is no longer understanding tax rules in the abstract but ensuring that invoicing, documentation, and system workflows are built to comply from day one. Doing so preserves margins, reduces regulatory risk, and supports seamless cross-border business.

For investors, the reforms signal a maturing regulatory environment in which tax compliance is an integral part of product design and scaling strategy. Ultimately, the businesses that embed VAT compliance into their platforms and processes early will transform what was once a cost centre into a strategic advantage.

To view original Tope Adebayo article, please click here.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.