NRS Clears Up Confusion Over VAT on Bank Charges
The Nigeria Revenue Service (NRS) has issued an official statement clarifying that Value Added Tax (VAT) applies only to service charges collected by banks and financial institutions, not to the actual money customers transfer or withdraw. This was to correct widespread reports suggesting that the new tax law introduced a VAT directly on bank transfers.
Key Points from the NRS Statement
VAT is charged only on bank service fees or commissions, such as transfer fees, USSD charges, card issuance fees, and similar service charges. It is not charged on the amount that customers transfer or withdraw.
The NRS emphasized that this tax treatment is not a new levy introduced by the Nigeria Tax Act. VAT on banking services already existed under Nigeria’s existing VAT system the 2025 tax reforms did not create new VAT obligations for customers.
Recent reports that bank transfers would be taxed at 7.5% directly on the transfer amounts were described as incorrect and misleading by the tax authority.
Additional Clarifications
Interest earned on savings, fixed deposits, and similar accounts does not attract VAT, because interest is not considered a supply of goods or services for VAT purposes.
The Telegraph Nigeria
The NRS urged the public to depend on official communications for accurate tax information and to ignore misinformation circulating in certain media and social platforms.
Why the Misconception About VAT on Bank Transfers Arose
The confusion started when the new Nigeria Tax Act came into effect in 2026. Some social media posts and reports wrongly interpreted the law to mean that 7.5% VAT would be charged on the actual amount transferred during bank transactions.
The Nigeria Revenue Service (NRS) clarified that this interpretation is incorrect. VAT on banking services has always existed and was not newly introduced by the new tax law. The reform did not change the VAT treatment of bank transfers; it only restated existing principles, which were misunderstood and amplified online .
What Attracts VAT (7.5%)
VAT applies only to bank service charges, not the money you move. Examples include:
Transfer fees (e.g. ₦10, ₦25 charges)
USSD service fees
ATM maintenance or usage fees
Card issuance and replacement fees
Account maintenance or SMS alert charges
These are considered fees for services rendered, which are taxable under VAT laws .
What Does NOT Attract VAT
The actual amount transferred between accounts
Cash withdrawals or deposits
Interest earned on savings or fixed deposits
Loan principal amounts
NRS emphasized that customers are not being taxed on their money, only on the service cost charged by banks .
Key Takeaway
There is no VAT on bank transfers themselves. VAT applies only to the service fees charged by banks, and this position remains unchanged under the new tax law.
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