Learn how to pay your VAT in Nigeria in 5 minutes. Use the expert tips here plus the free downloadable VAT payment checklist to navigate the Nigerian VAT landscape.
Ever wondered how to pay VAT in Nigeria and stay on the right side of the law?
You’re not alone. Value Added Tax (VAT) is a crucial financial responsibility for businesses in Nigeria, and understanding the ins and outs of VAT compliance can help your business succeed.
In this comprehensive guide, we’ll walk you through the essential steps to paying VAT in Nigeria, explain why it’s so important, and answer any burning questions you might have.
Table of Contents
- VAT compliance is a legal requirement under the Value Added Tax Act 1993.
- Value-added tax contributes significantly to the Nigerian government’s revenue for infrastructure development.
- Non-compliance can disrupt business operations due to legal issues or investigations.
- Maintain accurate records of VAT transactions to avoid legal issues.
- You can pay VAT online via the Tax Promax platform or offline through a FIRS-approved bank.
- Do Small Businesses Pay VAT In Nigeria?
- How to Get Your TIN Number In 5 Days
- How to Hire the Right Tax Consultant In Nigeria
Why VAT Compliance is Important
As a business owner in Nigeria, staying VAT compliant in Nigeria is essential for several reasons, including:
First and foremost, VAT compliance is a legal requirement.
The Value Added Tax Act of 1993 mandates that VAT-registered businesses collect and remit VAT on their taxable supplies.
Failure to comply can result in severe legal consequences, including fines, penalties, or legal charges.
So, if you run a business that is registered for VAT, it is required that you stay compliant with the regulations.
Another importance of VAT compliance is that this multistage tax is a significant source of revenue for the Nigerian government.
VATs fund various public infrastructure development and services, contributing to the overall growth and development of the country.
If you run a business registered for VAT in Nigeria, and you want to avoid financial losses or reputational damages, one vital step to take is remaining compliant with Value Added Tax Regulations.
The consequences of not paying VAT include hefty penalties, fines, and legal actions, which can negatively impact your business’s cash flow and reputation.
Still on reputation, complying with VAT regulations enhances your business’s image.
Certain entrepreneurs may opt to collaborate exclusively with registered enterprises, rejecting any unregistered businesses while seeking alternative clients.
Maintaining a VAT-compliant status advertises that you are a responsible and law-abiding entity, which can boost trust among customers, suppliers, and partners.
Input Credit Benefit
Being a VAT-compliant business grants you the privilege of claiming input VAT credits, reducing the overall tax burden.
This can significantly improve your cash flow and profitability.
VAT compliance can set you apart from competitors who may not be complying.
Customers and partners may prefer working with businesses that follow the law.
Non-compliance can disrupt your business operations.
These disruptions might be due to legal issues or investigations, which can be costly and time-consuming.
In summary, VAT compliance is not just a financial obligation; it’s a strategic move to ensure your business’s longevity and success in Nigeria.
Download Free VAT Payment Checklist
Download this resource to stay VAT-compliant and in good standing with the government. It’ll walk you through the entire process, from determining your eligibility to submitting your returns.
How to Register for VAT In Nigeria
Registering for Value Added Tax (VAT) in Nigeria involves several steps. Here’s a detailed guide:
Step 1: Determine Eligibility
Ensure your business meets the criteria for VAT registration. Typically, businesses with an annual turnover exceeding ₦25 million must register.
Step 2: Obtain a Taxpayer Identification Number (TIN)
If your business doesn’t have a TIN, obtain one from the Federal Inland Revenue Service (FIRS).
You can do this by completing the TIN application form available on the FIRS website.
You can check our TIN application guide for more information on how to get your TIN quickly.
Step 3: Gather Necessary Documents
Documents you may need include:
- Certificate of Incorporation (for registered businesses)
- Memorandum and Articles of Association
- Evidence of business address (utility bill or tenancy agreement)
- Bank account details
- List of directors and shareholders
- Passport photographs of directors
Step 4: Complete VAT Registration Form
Download the VAT registration form (VAT Form 001) from the FIRS website and input the required information accurately.
Step 5: Submit Application
Submit your completed VAT registration form and supporting documents to the nearest FIRS office.
Always recheck to ensure you’re not leaving any necessary documents.
Step 6: Verification and Inspection
FIRS may conduct a verification and inspection of your business premises. This process ensures that the information provided is accurate and aligns with your business’s physical business.
Step 7: VAT Certificate Issuance
Upon successful verification, FIRS will issue a VAT registration certificate that confirms your business’s eligibility to collect and remit VAT.
Step 8: Commence VAT Collection
After obtaining the VAT certificate, your business can legally charge and collect VAT on eligible goods and services.
Ensure to indicate VAT on your invoices.
Step 9: Compliance and Record Keeping
Adhere to VAT regulations, maintain accurate records of transactions, and file VAT returns as required by the tax authorities.
Note: VAT registration processes may be subject to updates or changes. Hence, we advise checking the FIRS website or consulting with tax professionals to stay up-to-date with regular updates.
Follow These Quick Steps to File VAT Returns
First, FIRS VAT regulations demand that all businesses registered for Value Added Tax file VAT returns and remit dues before the 21st day of the month following the month of sales. Some always aim at that to stay VAT-compliant.
And here are the steps to file VAT returns in Nigeria:
- Open the FIRS TaxPro Max portal on your browser.
- Click the “login” button and input your email and password to access your account.
- Don’t have an account? Click the “register” button to create one, provide all necessary information, then click on register.
- The first page you’ll see after logging in is the Taxpromax dashboard. Navigate to the “taxes due” option and click.
- Select VAT as the tax type, then click on “process” under the action column.
- On the next page, you’ll encounter a list of schedules to be completed. Start with the first one, “Goods and services exempt.”
- Input the name of any goods and services (if any) with the sum. When inputting the sum under the “amount” column, ensure the figures are without a comma (,).
- After entering the sum, click “add record” followed by the “proceed” button.
- On the sales adjustment schedule, input the name and amount of items for sale adjustment. When done, click on “add record” then “proceed.”
- Once you’ve completed the schedules, the VAT form will be prepared and displayed on your screen.
- Choose NGN as the currency type under “returning currency.”
- Enter Total Sales/Income Exclusive of VAT 10, and the system will automatically compute other necessary lines.
- Beneath your completed VAT form, click on the check box under “declaration.”
- You’ll encounter a pop-up asking you to confirm the payment amount.
- Finally, click “OK” and then “Submit.”
Remember: maintaining accurate records is crucial to avoid any legal issues.
Also, your return must be accompanied by a listing of all VATable supplies received and provided.
Failure to file a return may incur a fine of NGN 5,000 per month, and failure to remit any VAT due will incur a fine equal to five percent of the liability, plus interest.
Hence, we recommend filing VAT returns on time and maintaining accurate records to avoid penalties.
Congrats! You’ve filed a VAT return. You can now proceed to pay your value-added tax.
Here’s How to Pay VAT in Nigeria…
You can pay your VAT in Nigeria in person or online.
Let’s begin with the second option.
How to Pay VAT Online in Nigeria
Now that you’re ready to pay Taxes, here’s a detailed step-by-step process on how to pay your VAT online in Nigeria:
Step 1: Registration
Ensure your business meets the VAT threshold of an annual turnover of N25 million.
Register for VAT payment with the Federal Inland Revenue Service (FIRS) by filling out and submitting the VAT registration form (VAT form 001).
Obtain a Tax Identification Number (TIN) and a VAT certificate from the FIRS.
Step 2: Login to the TaxPro Max (TPM) Platform
Visit the FIRS website and locate the TaxPro Max (TPM) platform. This is the official online platform for filing and paying taxes in Nigeria.
Step 3: Log in to Your Account
Access your TaxPro Max account using your login credentials.
If you don’t have an account, you may need to create one by providing your TIN, phone number, email address, etc.
Step 4: Navigate to VAT Section
Once logged in, click on “taxes due” and select the section designated explicitly for VAT filing and payment.
Step 5: Fill VAT Returns Form
Fill in the required information in the Value Added Tax Returns form.
This includes financial details based on expert auditors’ advice.
You may need to provide the following information:
- Taxpayer details: TIN, name, address, etc.
- Period of filing: month and year
- VAT payable: total output tax, total input tax, net VAT payable, etc.
- VAT schedule: details of sales and purchases subject to VAT
- Declaration: signature, name, and date of the taxpayer or authorized representative
Contact a tax professional if you don’t know or have access to the above information.
Step 6: Verify Information
Verify the entered information, ensuring it’s accurate and compliant with tax regulations.
Reviewing your entered information gives room for edits if you make a mistake.
After verifying, click on “Submit.”
Step 7: Generate Payment Reference Code
You’ll see the payment description and amount on the payments page. So, click “pay.”
The system will automatically assign a unique payment reference code to your transaction.
This code is necessary to pay directly online or print the payment page to pay at a bank.
Step 8: Choose Payment Method
Click on “pay online,” then input your payment info and choose your preferred online payment method, which could include bank transfer of credit/debit cards. After that, you can confirm the transaction.
After confirmation, you will be redirected to a secure payment gateway to complete the payment.
Step 9: Confirmation and Receipt
Once payment is completed, you should receive a payment receipt and confirmation of the transaction.
We recommend downloading or printing the receipt for your records, as this can be useful in the future.
Step 10: Record Transaction Details
From our experience, keeping a record of the transaction details is crucial for your business records and future reference.
At some point, you may need these records as proof of payment to the FIRS or other authorities.
Step 11: Monitor for Updates
The current information on how to pay VAF in Nigeria is subject to change. So, we advise regularly checking your TaxPro Max account for any updates or changes in VAT regulations.
You can also view your previous payments and VAT returns on the platform.
Remember, this process may change based on updates from the FIRS or changes in online payment platforms.
We recommend regularly consulting the FIRS website or contacting their support to stay updated with changes in the VAT payment process.
Follow These Steps to Pay VAT Offline in Nigeria
Here’s how offline VAT payment works in four easy steps:
You must first review your business’s financial records for the month and calculate the amount of VAT you owe.
You can use the VAT form 002 (the FIRS’s guide on filing taxes) to help you with this.
Download the form from the FIRS website or get a copy from any FIRS office.
Print the payment reference slip with the Remita Retrieval Reference (RRR) number or payment reference code. You can do this by logging into the TaxPro Max portal and completing the required schedules. After completing the schedules, the VAT form will be automatically generated.
Click “Print (Pay At Bank Using Remita),” and the slip will download for you to open and print.
Take the payment reference slip and the VAT form to any approved bank and make the payment. You can find a list of approved banks on the FIRS website.
According to FIRS regulations, you must pay the VAT by the 21st of the month following the reporting period.
Submit the stamped payment receipt and the VAT form to the nearest FIRS office. We advise keeping a copy of these documents for your records.
VAT is Not the End—Also Keep these Taxes In Mind
Other taxes you should be aware of as a small business owner in Nigeria include:
Company Income Tax (CIT)
All companies registered in Nigeria, except those involved in petroleum operations, are subject to this tax.
CIT is a yearly levy on registered companies’ profits, with a 20 percent rate for small businesses and 30 percent for large corporations.
Personal Income Tax (PIT)
This tax is payable by all sole proprietors and partnerships. PIT rates vary on a progressive scale based on income.
Only individuals registered under Part A of the Companies and Allied Matters Act 1990 are exempted from this tax.
The education tax is chargeable on all Nigeria-registered companies and is levied at two percent on the assessable profits of companies to fund educational infrastructure.
Withholding Tax (WHT)
WHT is an advance payment of income tax deducted at the source of specific transactions such as interest, dividends, and service payments.
The withholding tax rates vary depending on the beneficiary’s status and type of income.
Capital Gains Tax (CGT)
This is a ten percent levy on capital gains from the sale or disposal of chargeable assets.
Capital gains are the profits you make as an investor after selling capital assets for a price higher than you purchased them.
Stamp duty charges accompany specific legal documents and transactions, with varying rates depending on the document type.
Tertiary Education Trust Fund (TETFund) Levy
Here, Nigerian Companies support tertiary education via a two percent levy on assessable profits.
As a small business owner, it’s crucial you understand these taxes, keep accurate records, and stay updated on tax regulations to ensure compliance and avoid penalties.
You can also consult professionals to help you navigate the complexities of the tax landscape.
How to Hire the Right Tax Consultant in Nigeria
Here’s a resource to help you hire the right tax consultant in Nigeria to lower your liabilities and navigate the complex Nigerian tax environment. We’ve included 25 questions to ask prospective consultants so you can make the best hiring decision possible.
VAT Payment FAQs
How Often Should I Pay VAT?
You should pay VAT monthly or quarterly, depending on your business’s category and turnover.
You are generally required to remit VAT monthly if your business’s annual turnover exceeds the ₦25 million threshold.
However, you can opt for quarterly payments if your firm’s annual turnover exceeds the stipulated amount.
We recommend ascertaining your business category and adhering to the stipulated schedule to avoid penalties through VAT compliance.
What are the Consequences of Not Paying VAT?
The consequences of failing to pay VAT in Nigeria include:
- Financial repercussions in the form of penalties and added interest
- Legal actions by tax authority against your firm
- Business closure
- Loss of reputation
- Seizure of assets
- Ineligibility for government contracts
Is VAT Important for My Business?
Yes, Value Added Tax (VAT) is essential for your business because it boosts your business’s credibility and grants you a competitive edge over your rivals.
Furthermore, staying VAT compliant can help you establish relationships with other corporations, as it is sometimes a requirement for other firms, especially larger ones, to transact with your business.
How is VAT Deducted in Nigeria?
Businesses in Nigeria deduct Value Added Tax (VAT) using an input-output system.
The VAT paid on business expenses is known as “Input VAT,” and the Value Added Tax received from customers is known as “Output VAT.”
Subtract Input VAT from Output VAT to figure out if a business owes VAT to the government or is eligible for a refund or credit.
Effective VAT administration and compliance depend on keeping correct records and submitting frequent VAT returns.
How Do I Charge VAT to Customers in Nigeria?
To charge Value Added Tax on customers in Nigeria:
- Find the current VAT rate (7.5 percent, for example).
- Select if you’ll include Value Added Tax on the price or not.
- Use the selling price multiplied by the VAT rate to calculate the VAT.
- Clearly highlight prices on invoices, specifying if you included VAT or not.
- Verify that invoices have the relevant information, including your VAT registration number.
- Inform customers about VAT fees to maintain transparency.
- Keep abreast of changes to VAT legislation to ensure compliance.
VAT Payment in Nigeria: Now, What Next?
The expert tips here can help you swiftly navigate the Nigerian VAT landscape.
Not only will you be fulfilling a legal obligation, but you’ll also be setting your business up for success. And the VAT adventure doesn’t end there—it’s just the beginning of a journey to secure your business’s reputation, gain a competitive edge, and grow your customer base.
What’s next? Keep your records clean, stay ahead of regulatory twists, and explore how VAT compliance can be a strategic ally. And don’t forget to download our free VAT payment checklist to stay on track and organized.