The Nigeria Revenue Service (NRS) has stepped in to clear up widespread confusion over Value Added Tax (VAT) on banking transactions, stressing that VAT is only charged on bank service fees — not on customer money transfers or account balances.
In a statement released this week, the revenue authority described recent media claims suggesting that VAT would be applied to the actual sums Nigerians send or receive through their bank accounts as false and misleading.
VAT Still 7.5%, But Applies Only to Bank Fees
According to the NRS, VAT at the standard rate of 7.5 percent continues to apply to services provided by banks, fintech companies, and other financial institutions — including transfer fees, card issuance charges, USSD fees, account maintenance levies and similar service costs. However, that tax does not extend to customer funds being transferred or withdrawn.
To make it clearer, the agency explained:
- If a bank charges a customer ₦100 for a transfer service, the 7.5% VAT applies only to the ₦100 fee — which comes to ₦7.50 — and not to the amount being sent.
- The actual value of money you send from your account is not subject to VAT.
This clarification is crucial for everyday bank customers, micro-entrepreneurs, digital business owners and MSMEs who rely on electronic payments and digital banking to operate. It assures them that the cost of living and business transaction values are not being hit with a broader tax.
The NRS emphasised that the Nigeria Tax Act did not introduce any new VAT obligations on customers. Rather, what has changed is a renewed focus on improved enforcement and compliance by financial institutions so that VAT that has already always applied is properly collected and remitted.
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The agency also stressed that:
- Interest income from savings accounts and fixed deposits remains VAT-exempt because it is not treated as a supply of goods or services.
- Essential goods and services, including basic food staples, core educational services and key medical and pharmaceutical products, remain outside the VAT net.
These reassurances aim to soothe public concern and prevent misunderstandings that could slow adoption of digital payments or formal banking services — tools that are critical for small business growth, especially in a rapidly digitising economy.
Why This Matters for Smartpreneurs and MSMEs
For entrepreneurs, startups and MSMEs operating in Nigeria’s vibrant digital economy, this clarification provides much-needed certainty around tax obligations. It means:
- Your transaction values do not attract VAT — meaning your pricing structures and cash-flow calculations remain unaffected.
- Only service fees charged by banks or fintechs carry the tax, which is typically a small amount relative to daily operational costs.
- You can continue using digital wallets, online transfers and banking services without fears of hidden taxes eating into your bottom line.
The NRS has urged all Nigerians to ignore misleading news reports and rely on official communications for accurate, up-to-date tax information.
