Nigeria’s revenue authority has clarified that the 7.5 percent Value Added Tax applies only to charges collected by banks for their services and not to the actual funds transferred by customers, countering widespread claims that VAT is being imposed directly on bank transfers.
The Nigeria Revenue Service said reports suggesting that customers would now pay VAT on electronic transfers, withdrawals or other banking transactions are misleading. According to the agency, VAT has long applied to service charges imposed by banks under Nigeria’s existing tax framework and was not introduced by the Nigeria Tax Act.
In a statement issued yesterday, the revenue service stressed that the current tax law does not create any new tax burden for bank customers. It explained that VAT is charged only on the service provided by financial institutions, such as transfer fees or commissions, and never on the amount of money being moved.
To illustrate, the agency said if a bank charges a customer ₦10 as a transfer fee, VAT of 7.5 percent applies only to that ₦10 charge, amounting to 75 kobo, and not to the full value of the transfer. The amount sent or withdrawn by the customer remains completely outside the VAT net.
The revenue service also dismissed claims that VAT is now being imposed on interest earned from savings accounts or fixed deposits, noting that interest income is not considered a supply of goods or services under the tax law and therefore does not attract VAT.
Beyond banking, the agency sought to reassure Nigerians that essential items and services remain protected. It said basic food items and essential goods are still exempt from VAT, a provision aimed at easing cost-of-living pressures. Essential medical services, pharmaceutical products, tuition and core educational services provided by recognised institutions also remain VAT-free.
According to the NRS, the key shift under the current tax framework is not the introduction of new VAT rules but stricter compliance and enforcement. Financial institutions, it said, are being reminded to properly remit VAT that has always applied to their service charges.
For small businesses and MSMEs that rely heavily on bank transfers, digital payments and savings, the clarification means transaction values are not being taxed. Only the relatively small service fees charged by banks attract VAT, as has always been the case. This distinction, the agency noted, is important to avoid unnecessary fear and misinformation that could discourage digital payments or formal banking.
The revenue service urged the public and business owners to disregard false reports and rely on official communications for accurate tax information, insisting that the Nigeria Tax Act does not introduce new VAT burdens on savings, food, healthcare, education or essential consumption.
