How to calculate and file VAT in Nigeria for small businesses
A practical step-by-step guide to computing output VAT, input VAT, and your net VAT payable to NRS every month. Includes a worked example and the full filing process on NRS Rev360 — the digital tax administration platform that replaced TaxPro Max.
Value Added Tax is one of the most misunderstood obligations for Nigerian small businesses. Many business owners either charge it incorrectly, fail to remit it, or do not know they are required to register for it at all. This guide walks you through everything you need to know to calculate VAT correctly and stay on the right side of the Nigeria Revenue Service.
7.5%
Current VAT rate
₦25M
Registration threshold
21st
Monthly filing deadline
₦50,000
First-month late penalty
What is VAT in Nigeria?
VAT is a consumption tax charged on the supply of goods and services in Nigeria. The current rate is 7.5 percent, introduced by the Finance Act 2019 which raised it from the previous rate of 5 percent. It is collected by businesses on behalf of the government and remitted to NRS every month.
VAT is not a cost to your business. You collect it from your customers when you sell to them (output VAT), and you recover it from your suppliers when you buy from them (input VAT). The difference between the two is what you pay to NRS.
Who must register for VAT?
Any business with annual taxable turnover above ₦25 million must register for VAT. However, even businesses below this threshold can register voluntarily, which allows them to recover input VAT on their purchases.
If you supply VATable goods or services and your turnover is below ₦25 million, you are treated as a small company and are exempt from charging VAT. But once you cross that threshold, you must register within 6 months.
Key threshold
Annual taxable turnover above ₦25 million requires mandatory VAT registration with NRS. Register through the NRS Rev360 portal, which replaced TaxPro Max as the official digital tax administration platform.
Output VAT vs input VAT
Before calculating what you owe, you need to understand these two terms.
Output VAT is the VAT you charge your customers on your sales. If you sell goods worth ₦100,000, you charge 7.5 percent on top of that, so the customer pays ₦107,500. The ₦7,500 is your output VAT.
Input VAT is the VAT you pay your suppliers when you buy goods or services for your business. If a supplier charges you ₦50,000 plus VAT, you pay ₦53,750. The ₦3,750 is your input VAT which you can recover.
1 · Customer
Pays ₦107,500
₦100k sale + ₦7,500 VAT
2 · You collect
₦7,500 output VAT
Held on behalf of NRS
3 · You claim
₦3,750 input VAT
Paid to suppliers
4 · Net to NRS
₦3,750
By the 21st via NRS Rev360
How to calculate your VAT payable
The formula is straightforward:
VAT payable = Output VAT − Input VATHere is a practical example:
| Description | Amount (₦) |
|---|---|
| Total sales for the month | 800,000 |
| Output VAT collected (7.5%) | 60,000 |
| Total purchases for the month | 400,000 |
| Input VAT paid (7.5%) | 30,000 |
| Net VAT payable to NRS | 30,000 |
What goods and services are VATable?
Most goods and services are subject to VAT at 7.5 percent. However, the following are exempt from VAT under Nigerian law:
- Basic food items including cereals, fish, flour, fruits, meat, milk, vegetables, and water
- Medical and pharmaceutical products
- Books, newspapers, and educational materials
- Baby products
- Agricultural equipment and products
- Financial services
- Exported goods and services (zero-rated)
If your business sells a mix of exempt and taxable goods, you need to apportion your input VAT claim accordingly.
How to file VAT returns with NRS
VAT returns are filed monthly. The deadline is the 21st of the following month. So for January sales, you must file and pay by February 21st.
Here is the step-by-step process:
- Log in to NRS Rev360 using your Tax Identification Number and password.
- Open Returns, then select VAT Return (Form 002).
- Enter your total taxable sales for the period in the output VAT section.
- Enter your total taxable purchases in the input VAT section.
- The system calculates the net VAT payable automatically.
- Generate a payment reference number and make payment through any NRS-approved bank or online platform.
- Upload your payment receipt and submit your return.
Late filing penalty
Failure to file VAT returns attracts a penalty of ₦50,000 for the first month of default and ₦25,000 for every subsequent month. Always file even if you have no transactions for the month.
Common VAT mistakes Nigerian businesses make
- Charging VAT on exempt items such as basic foodstuffs and medications.
- Not keeping valid VAT invoices from suppliers, which means input VAT cannot be claimed.
- Mixing VAT collected with business revenue and spending it before remitting to NRS.
- Filing returns late and accumulating penalties that add up over months.
- Not registering for VAT after crossing the ₦25 million threshold.
How DigitGlance makes VAT tracking easier
DigitGlance Invoice automatically tracks output VAT from every invoice you create and input VAT from every purchase invoice you record from suppliers. The VAT liability report shows you exactly what you owe NRS for any period, with a breakdown of all transactions. You can export the report to CSV and use the figures directly when filing on NRS Rev360.
Track your books, file VAT, and get paid faster.
DigitGlance Invoice and POS handle invoicing, VAT, inventory, and reports so you can focus on running the business — not on chasing receipts.
