Do I need to register for VAT as a small business in Nigeria?

Under the Nigeria Tax Act 2025 and the Nigeria Tax Administration Act 2025 (both effective as of January 1, 2026), the rules for VAT registration have been simplified to favor micro and small businesses.

The short answer is: If your annual turnover is ₦50 million or less, you are not required to register for, charge, or remit VAT.

Here is the breakdown of the new rules for 2026:

1. The VAT Exemption Threshold

• The Magic Number: ₦50 Million. * The Change: Previously, the threshold was ₦25 million. The new law has doubled this, meaning any business with annual gross sales (Turnover) below ₦50 million is legally exempt from the VAT system.
• Non-Professional Service Exemption: While many small businesses enjoy this ₦50m threshold, there is a push to expand this "Small Company" definition to ₦100 million for certain administrative reliefs. However, for VAT collection specifically, ₦50 million remains the primary legal cutoff for 2026.

2. What "Exempt" Means for You

If you fall under the ₦50 million threshold:

• No Charging: You do not add 7.5% VAT to your invoices.
• No Remitting: You do not need to file monthly VAT returns to the Nigeria Revenue Service (NRS).
• Price Advantage: This makes your goods or services 7.5% cheaper than those of larger competitors who are forced to charge VAT.

3. The "Catch" for Small Businesses

Even if you don't register for VAT, you are still affected by it in two ways:

• Paying VAT on Purchases: You will still pay VAT when you buy items for your business (e.g., equipment, stationery) unless those items are specifically exempt (like basic food or medical supplies).
• No Input VAT Recovery: Since you are not a "VAT-registered person," you cannot claim back the VAT you paid on your business expenses. You must treat it as part of your cost of doing business.

4. Who MUST Register Regardless of Turnover?

The new law is stricter on certain sectors. You may be required to register even if your turnover is low if you are in:

• Professional Services: Legal, accounting, and specialized consulting firms often have different compliance expectations under the 2025 Act.
• Digital Service Providers: If you sell digital products or services to Nigerians from abroad, you are mandated to register and use the new e-invoicing system.

Summary Checklist

Warning: If you choose to charge VAT even though you are below the ₦50m threshold, the law says you must remit every kobo collected to the government. Keeping VAT money you collected "by mistake" is a serious offense.