Nigeria’s tax authorities have moved to calm public anxiety, insisting that Value Added Tax (VAT) is not being charged on the actual money people transfer between bank accounts.
The Nigeria Revenue Service (NRS) issued a statement on Thursday to “dispel misleading narratives” suggesting that a new 7.5% tax had been slapped on electronic transfers.
The agency clarified that while VAT does apply to banking, it is only charged on the fees banks take for their services—not the “principal” sum being sent by the customer.
How the math works
To simplify the confusion, the NRS provided a practical example of how the tax is calculated:
- The Transfer: If a customer sends ₦100,000 to a friend, no tax is taken from that ₦100,000.
- The Bank Fee: If the bank charges a ₦10 service fee for that transaction, VAT is applied only to that ₦10.
- The Tax: The 7.5% VAT on a ₦10 fee is ₦0.75.
The agency stressed that this is not a new policy introduced by the recent Nigeria Tax Act, but a long-standing rule within the country’s tax framework.
What is exempt?
In an effort to reassure citizens facing a high cost of living, the NRS highlighted several areas where VAT does not apply:
- Savings & Interest: Interest earned on savings accounts or fixed deposits is not taxed under VAT.
- Essentials: Basic food items and essential goods remains VAT-exempt to protect vulnerable consumers.
- The “Principal” Sum: The actual money being moved or withdrawn remains untouched by the tax man.
“VAT has always applied to fees, commissions, and charges for services rendered by banks,” said Dare Adekanmbi, spokesperson for the NRS Chairman. He urged the public to ignore “unfounded” claims that the government was taxing personal wealth movement.
The clarification follows a wave of social media panic after some customers noticed “VAT on bank charges” appearing more clearly on their electronic receipts and transaction alerts.
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