New Vat Directive: Nigeria Banks, Fintechs to Remit 7.5% Vat on Electronic Transaction Fees
The Federal Government has issued a directive requiring all commercial banks, microfinance institutions, and financial technology (fintech) firms to begin collecting and remitting a 7.5% Value Added Tax (VAT) on specific electronic banking service fees, effective Monday, January 19, 2026.
The move is part of broader government efforts to improve tax compliance, broaden the revenue base, and align Nigeria’s growing digital financial economy with existing tax legislation under the Nigeria Tax Act.
What Services Attract the 7.5% VAT?
Under the new directive, the VAT will apply to service charges levied by banks and fintech operators, not the actual funds being transferred or withdrawn. These charges include:
Mobile banking or money transfer fees
USSD transaction fees
Card issuance and activation fees
Point-of-Sale (PoS) and related digital transaction charges.
For example, if a customer pays ₦100 as a transfer fee, ₦7.50 will be added as VAT, charged only on the service fee not on the principal amount being transferred.
The Nigeria Revenue Service (NRS) formerly known as the Federal Inland Revenue Service (FIRS) has clarified that this VAT requirement is not a new tax but rather an enforcement of existing tax rules already embedded in Nigeria’s tax framework. According to the agency, VAT has long applied to service charges imposed by financial institutions, and the focus now is on ensuring consistent collection and remittance from all applicable service providers.
The NRS emphasised that reports suggesting VAT would be charged on the actual amounts transferred or withdrawn are misleading. VAT is strictly applied only to service fees and commissions generated by banks and fintech companies.
Certain financial components remain exempt from VAT, including:
Interest earned on savings and deposit accounts
Interest from fixed deposits and similar investment products
These items do not attract VAT as they are not considered a supply of goods or services under the Nigeria Tax Act.
What This Means for Customers
Although the VAT amount on each transaction may appear small, frequent use of mobile transfers, USSD sessions, or PoS transactions could result in noticeable additional costs for users over time. Banks and fintech platforms have indicated that the VAT will be clearly itemised on customer transaction statements to promote transparency.
The directive is expected to have implications across Nigeria’s digital economy, touching millions of daily financial transactions conducted via mobile phones, apps, and other electronic channels.
Looking Ahead
This enforcement signals a continued push by the Nigerian government to integrate digital financial services fully into the national tax system while ensuring compliance across the expanding fintech ecosystem. Analysts say that clearer tax policies like this could enhance revenue generation but also highlight the need for effective communication to minimize public misunderstanding.
