Nigeria VAT Calculator — How to Calculate 7.5% VAT (2026)

Nigeria's Value Added Tax has been through significant changes since it was first introduced in 1993. For businesses operating in Nigeria today, understanding the current 7.5% rate, what it applies to, and how to calculate it accurately is essential for compliance and invoicing. This guide covers everything you need to know.

A brief history of VAT in Nigeria

Nigeria introduced VAT in 1993 under the Value Added Tax Decree No. 102 of 1993, replacing the old Sales Tax. The original rate was set at 5% — one of the lowest VAT rates in Africa at the time. For over two decades that rate held steady, making Nigeria's VAT burden comparatively light.

In January 2020, the Federal Government of Nigeria raised the VAT rate to 7.5% through the Finance Act 2019, signed into law by President Muhammadu Buhari. The increase was part of a broader fiscal reform package designed to grow Nigeria's non-oil tax revenues, which had been under significant pressure from falling crude oil prices. The new rate came into effect on 1 February 2020 and remains in force as of 2026.

VAT in Nigeria is administered by the Federal Inland Revenue Service (FIRS) under the VAT Act (Cap V1, LFN 2004) as amended by the Finance Acts of 2019, 2020, 2021, and 2023.

VAT registration threshold in Nigeria

Not every Nigerian business is required to register for VAT. Under the Finance Act 2019, small businesses with annual turnover below ₦25 million are exempt from VAT registration. This threshold was introduced specifically to relieve the administrative burden on micro and small enterprises.

Businesses with annual turnover of ₦25 million or above must:

• Register for VAT with the FIRS by obtaining a Tax Identification Number (TIN)
• Charge 7.5% VAT on all taxable supplies of goods and services
• File monthly VAT returns (Form 002) by the 21st of the following month
• Remit the net VAT collected to the FIRS within the same deadline

Even businesses below the threshold may choose to register voluntarily to be able to claim input VAT credits on their purchases — a benefit worth considering if the business has significant taxable expenses.

What goods and services are VAT-exempt in Nigeria?

Several categories of goods and services are exempt from VAT in Nigeria — meaning no VAT is charged and the supplier cannot claim input VAT credits on related purchases. The key exempt categories under the current law include:

• Basic foodstuffs: unprocessed food items including cereals, tubers, vegetables, fruits, meat (unprocessed), and fish
• Medical and pharmaceutical products: drugs and vaccines listed in the schedule to the VAT Act
• Educational materials: books, newspapers, and educational materials supplied to schools and universities
• Baby products: baby food and infant formula
• Agricultural equipment and inputs: tractors, fertilizers, planting seeds, and veterinary products
• Exported goods and services (zero-rated at 0% — distinct from exempt)
• Residential accommodation: rent on residential property
• Medical services: services supplied by hospitals and medical practitioners
• Services by banks and financial institutions (though some fintech services may now be subject to VAT following Finance Act amendments)

It is worth noting that the Finance Acts have progressively narrowed the list of exempt items. Always verify against the most current version of the VAT Act for your specific product or service category before assuming exemption.

How to add 7.5% VAT to a price in Nigeria

Adding VAT to a net price in Nigeria is straightforward:

• Formula: VAT amount = Net price × 0.075
• Total (inc. VAT): Net price × 1.075

Worked examples in NGN:

• A product priced at ₦10,000 (ex-VAT): VAT = ₦10,000 × 0.075 = ₦750. Total = ₦10,750.
• A consulting fee of ₦250,000 (ex-VAT): VAT = ₦250,000 × 0.075 = ₦18,750. Total = ₦268,750.
• A software subscription of ₦50,000 per month (ex-VAT): VAT = ₦3,750. Total = ₦53,750.

How to remove VAT from a gross price (reverse VAT)

If you have a VAT-inclusive price and need to find the net amount and VAT component:

• Formula: Net price = Gross price ÷ 1.075
• VAT amount: Gross price − Net price

Worked examples:

• Invoice total of ₦107,500 (inc. VAT): Net = ₦107,500 ÷ 1.075 = ₦100,000. VAT = ₦7,500.
• Gross amount of ₦53,750 (inc. VAT): Net = ₦53,750 ÷ 1.075 = ₦50,000. VAT = ₦3,750.

Use the Nigeria VAT calculator above to perform these calculations instantly without manual arithmetic. For invoicing clients with VAT applied correctly, the free invoice generator lets you set any VAT rate and generates a professional PDF in seconds.

Input VAT and the VAT credit mechanism

A key feature of Nigeria's VAT system is the input VAT credit. When a registered business purchases taxable goods or services from another registered business, the VAT paid on those purchases (input VAT) can be offset against the VAT charged to customers (output VAT). Only the net difference is remitted to the FIRS.

Example: A registered business collects ₦45,000 in output VAT from customers in a month and pays ₦12,000 in input VAT on purchases. The net VAT payable to FIRS = ₦45,000 − ₦12,000 = ₦33,000.

This mechanism prevents VAT from cascading through the supply chain. However, input VAT cannot be claimed on exempt supplies or on personal/non-business expenses.

Common VAT mistakes businesses make in Nigeria

Charging VAT below the ₦25 million threshold. Businesses below the mandatory registration threshold should not charge VAT — but some small businesses do, which can attract scrutiny from the FIRS.

Treating all food as exempt. Only unprocessed food is exempt. Processed food and beverages (bottled water, soft drinks, packaged snacks) are standard-rated at 7.5%.

Missing the monthly filing deadline. VAT returns are due by the 21st of each month for the preceding month. Late filing attracts penalties of ₦50,000 for the first month and ₦25,000 per subsequent month, plus interest on outstanding VAT.

Not separating VAT on invoices. Registered businesses must show VAT as a separate line item on tax invoices. Embedding it in the total price without disclosure is non-compliant.

Related tools

• Nigeria VAT Calculator — Add or remove 7.5% VAT from any Naira amount
• Global VAT Calculator — Calculate VAT for multiple countries
• Free Invoice Generator — Create professional invoices with VAT in PDF format