NRS Provides Clarification on 7.5% VAT for Banking Services

The Nigeria Revenue Service (NRS) has issued a clarification on the application of Value-Added Tax (VAT) on banking services, which includes electronic money transfers, commissions, and fees, emphasizing that it solely pertains to the charges already imposed by banks.

In a statement released on Thursday, the NRS highlighted that VAT has consistently applied to banking services and is not a recent addition arising from the new tax legislation, known as the Nigeria Tax Act.

The statement, which was signed by Dare Adekanmbi, Special Adviser on Media to NRS Chairman Zacch Adedeji, clarified, "The Nigeria Tax Act has not introduced any VAT on banking fees, nor has it created any new tax requirements for customers in this respect."

The NRS further aimed to correct misleading reports circulating in certain media outlets suggesting that VAT on banking services, fees, and electronic money transfers has recently been instituted. Such claims were firmly labeled as incorrect.

"Value Added Tax has always been applicable to the fees, commissions, and charges for services offered by banks and other financial institutions under Nigeria's established VAT framework. The Nigeria Tax Act did not create any new VAT obligations related to banking fees," the statement clarified.

The agency encouraged the public and all stakeholders to disregard erroneous information and to refer to official communications for reliable, accurate, and current tax information.

Additionally, the statement included a series of Frequently Asked Questions (FAQs) concerning VAT as it relates to the tax law, aiming to shed light on other pertinent issues for the Nigerian populace.

According to the FAQs, VAT applies to banking services where a fee or commission is incurred for a specific service provided.

"VAT encompasses commissions, fees, and charges levied for services rendered by banks and other financial entities, including transfer fees, USSD charges, card issuance fees, account maintenance fees, and akin service charges. This has long been the standard under Nigerian VAT regulations and was not initiated by the Nigeria Tax Act," it noted.

Moreover, it clarified that VAT is not applicable on the principal amount transferred or withdrawn, stating, "It is only applicable to the service charge or commission determined by the bank. For instance, if a bank charges N10 for a transfer, then VAT at a rate of 7.5% (or N0.75) will apply to that N10 fee—not the total amount sent."

Lastly, it mentioned that interest accrued from savings accounts, fixed deposits, and similar deposit accounts is exempt from VAT. Interest income does not constitute a supply of goods or services; hence it does not incur VAT under the Nigeria Tax Act of 2025.