Filing VAT correctly ensures compliance with Nigerian tax laws, prevents penalties, and allows businesses to claim Input VAT deductions. This detailed guide will walk you through the VAT filing process, from registration to payment and common mistakes to avoid.
Understanding VAT in Nigeria
What is VAT?
VAT is a 7.5% tax imposed on the value of taxable goods and services at the point of sale. The tax is collected by registered businesses and remitted to the FIRS by the 21st of the following month.
Who Should Register for VAT?
✔ Businesses with an annual turnover of ₦25 million or more
✔ Importers of taxable goods and services
✔ Government agencies, NGOs, and individuals purchasing VATable goods/services
✔ Non-resident companies doing business in Nigeria
Exempted businesses: If your annual turnover is below ₦25 million, you are not required to charge or remit VAT.
VATable and Non-VATable Items
Some goods and services are exempt from VAT in Nigeria.
VATable Goods and Services
Electronics, vehicles, and household appliances
Professional services (legal, accounting, consulting)
Telecommunications and internet services
Hotels, restaurants, and entertainment services
Non-VATable (Exempt) Items
Basic food items (rice, beans, yam, etc.)
Educational materials (books, journals)
Medical services and pharmaceuticals
Baby products
How to Register for VAT in Nigeria
Before you can file VAT, you must register your business with FIRS and obtain a Tax Identification Number (TIN).
Step-by-Step VAT Registration Process
✔ Step 1: Visit the FIRS e-Tax Portal (https://taxpromax.firs.gov.ng) or visit FIRS office
✔ Step 2: Sign in or create an account if you don’t have one if you are registering online
✔ Step 3: Navigate and fill in your business details online
✔ Step 4: Upload or submit supporting documents (CAC Certificate and other registration document, TIN, valid ID, etc.)
✔ Step 5: Submit the application and wait for FIRS approval
✔ Step 6: Once approved, you will receive a VAT registration certificate
How to File VAT Returns in Nigeria
VAT returns must be filed monthly (by the 21st of each month) whether your business made sales or not.
Step-by-Step VAT Filing Process
Step 1: Calculate VAT Payable
VAT payable = Output VAT – Input VAT
✔ Output VAT – VAT charged on goods/services sold (7.5% of sales)
✔ Input VAT – VAT paid on purchases (7.5% of business expenses)
Example:
Total Sales = ₦5,000,000 → Output VAT = ₦375,000 (₦5M × 7.5%)
Total Purchases = ₦2,000,000 → Input VAT = ₦150,000 (₦2M × 7.5%)
VAT Payable = ₦375,000 – ₦150,000 = ₦225,000
Step 2: Log into the FIRS e-Tax Portal
Visit https://taxpromax.firs.gov.ng
Enter your username and password
Step 3: Navigate to the VAT Filing Section
Select ‘File VAT Returns’
Enter total sales, purchases, and VAT paid
Step 4: Generate Payment Reference
If VAT payable is positive, generate a Remita Retrieval Reference (RRR)
Use Remita, bank transfer, or direct deposit to pay the VAT
Step 5: Submit VAT Returns
Download your VAT receipt for record-keeping
Note: If no sales were made in a month, you must file a Nil VAT Return to avoid penalties.
How to Pay VAT in Nigeria
You can pay VAT using any of the following methods:
- Online Payment via online banking platform or card
- Bank Payment
✔ Visit any commercial bank
✔ Provide your RRR
✔ Make payment over the counter
Common Mistakes to Avoid When Filing VAT
Many businesses face penalties due to VAT filing errors. Below are some common mistakes to avoid:
- Late Filing: Filing after the 21st of the month attracts a ₦50,000 penalty for the first month and ₦25,000 for subsequent months
- Not Registering for VAT: If your turnover exceeds ₦25 million, you must register or face penalties
- Incorrect VAT Calculations: Ensure VAT is calculated correctly to avoid audits and fines
- Failure to Claim Input VAT: Businesses can reduce tax liability by deducting VAT paid on purchases
- Not Keeping Records: FIRS may audit your business; always keep VAT receipts, invoices, and tax returns
Penalties for Non-Compliance
Failure to comply with VAT regulations can result in heavy fines and legal consequences.
Late Filing Penalties
₦50,000 for the first month
₦25,000 for each additional month
Failure to Register for VAT
Businesses that fail to register will be fined ₦50,000 for the first month and ₦25,000 for subsequent months
Underpayment or False Returns
Filing false VAT returns attracts a fine of 100% of the VAT underpaid
Tax evasion can lead to business closure or stricter penalty
Benefits of Filing VAT Correctly
Filing VAT on time ensures:
- Legal compliance – Avoid FIRS penalties and legal actions
- Improved business credibility – Many corporate clients only do business with VAT-compliant companies
- Eligibility for government contracts – Many tenders require businesses to show VAT compliance
- Claiming input VAT refunds – Reduces your total tax burden
Conclusion
Filing VAT in Nigeria is mandatory for businesses earning ₦25 million and above. By following the correct process—registering for VAT, calculating VAT correctly, filing returns before the deadline, and keeping records—you can avoid penalties and stay tax-compliant.
If you need expert assistance with VAT filing, consider hiring a professional tax consultant to ensure accuracy and compliance.
Need help with VAT filing? Contact a tax expert today to avoid penalties and ensure compliance with FIRS regulations!
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