The Nigeria Revenue Service (NRS) has moved to dispel confusion surrounding the application of Value-Added Tax (VAT) on banking services, insisting that the tax has long applied to financial institutions’ service charges and was not newly introduced under the Nigeria Tax Act.
In a statement issued on Thursday, the NRS described recent reports suggesting a new VAT on banking transactions as “incorrect and misleading”.
The statement, signed by Dare Adekanmbi, Special Adviser on Media to NRS Chairman Zacch Adedeji, clarified that “the Nigeria Tax Act did not introduce VAT on banking charges, nor did it impose any new tax obligation on customers in this regard.”
The agency stressed that VAT has always applied to fees, commissions, and other charges for services rendered by banks and financial institutions.
“The Nigeria Revenue Service (NRS) wishes to address and correct misleading narratives circulating in sections of the media suggesting that Value Added Tax (VAT) has been newly introduced on banking services, fees, commissions, or electronic money transfers. This claim is categorically incorrect,” the statement said.
Clarifying further, the NRS explained that VAT applies only to service fees, not to the principal amounts being transferred or withdrawn. For instance, a bank charging ₦10 for a money transfer would levy VAT of 7.5 per cent on that ₦10 fee, not on the sum being transferred. Similarly, interest earned on savings accounts, fixed deposits, or similar accounts is exempt from VAT, as it does not constitute the supply of goods or services.
The statement also reminded the public that basic food items, essential goods, medical products, and educational services remain exempt from VAT under the Nigeria Tax Act, ensuring protection for consumers and access to essential services.
Addressing the recent surge in public concern, the NRS noted that the change lies in enforcement, not the law itself.
“Financial institutions are being reminded of their existing obligation to remit VAT already charged and collected from customers, in line with the Nigeria Tax Act,” the statement said.
The NRS urged Nigerians to rely exclusively on official communications for accurate tax information and to disregard misinformation circulating in the media. To provide further clarity, the agency released a comprehensive Frequently Asked Questions (FAQs) section explaining how VAT applies to banking services and other areas under the law.
“The Act did not introduce VAT on savings, basic food, medical care, education, or essential consumption. Claims suggesting otherwise are misleading and incorrect,” Adekanmbi concluded.
FREQUENTLY ASKED QUESTIONS ON VAT
To further address public concerns and prevent misunderstanding, the Nigeria Revenue Service (NRS) provides the following clarifications.
Q1: Is VAT charged on banking services?
Yes, where a fee or commission is charged for a service.
VAT applies to commissions, fees, and charges for services rendered by banks and other financial institutions, such as transfer fees, USSD charges, card issuance fees, account maintenance fees, and similar service charges. This has always been the position under Nigerian VAT law, and was not introduced by the Nigeria Tax Act.
Q2: Does VAT apply to the money I transfer or withdraw?
No. VAT is not charged on the amount of money transferred or withdrawn. It applies only to the service charge or commission imposed by the bank. For example, if a bank charges ₦10 for a transfer, VAT of 7.5% (₦0.75) applies to that ₦10 charge—not to the amount being transferred.
Q3: Is VAT charged on savings account interest or interest on bank deposits?
No. Interest earned on savings accounts, fixed deposits, and similar deposit accounts is not subject to VAT. Interest income is not a supply of goods or services and therefore does not attract VAT under the Nigeria Tax Act, 2025 .
Q4: Are basic food items and essential goods subject to VAT?
No. The Nigeria Tax Act expressly exempts basic food items and essential goods from VAT in order to protect consumers and reduce the cost of living. These exemptions are clearly listed under the VAT exemption provisions of the Act .
Q5: Are medical and pharmaceutical products vatable?
No. Essential medical services and pharmaceutical products are VAT-exempt under the Nigeria Tax Act, consistent with longstanding policy to ensure access to healthcare.
Q6: Are educational services subject to VAT?
No. Tuition and core educational services provided by recognised educational institutions are exempt from VAT under the Act.
Q7: What exactly changed recently if VAT is not new?
What changed is compliance and enforcement, not the law. Financial institutions are being reminded of their existing obligation to remit VAT already charged and collected from customers, in line with the Nigeria Tax Act.
Q8: Did the Nigeria Tax Act introduce any new VAT burden on ordinary Nigerians?
No. The Act did not introduce VAT on savings, basic food, medical care, education, or essential consumption. Claims suggesting otherwise are misleading and incorrect.
