Why Nigerians Are Worried About the 7.5% VAT
Concerns about a 7.5% Value Added Tax (VAT) on banking and fintech transactions recently gained traction after customers of Moniepoint received an SMS notification on January 14.
The message left many Nigerians confused and anxious, prompting questions such as:
- Is this a new government tax?
- Will transfers suddenly become more expensive?
- Does this mean every naira moving in or out of an account will be taxed?
As speculation spread, Moniepoint followed up with an email aimed at clarifying the situation.
Moniepoint: This Is Not a New Tax
In its follow-up communication, Moniepoint explained that the VAT notice was not a new charge introduced by the company, but rather compliance with an existing, government-mandated tax regulation.
According to the fintech, the VAT applies to fees charged for certain services, including:
- POS transaction fees
- Mobile banking fees
- USSD transaction fees
- POS activation fees
- Card issuance fees
- Loan processing and documentation fees
Other banks and fintech companies issued similar notices, confirming that the change reflects regulatory enforcement rather than a company-specific policy.
So, What Exactly Is the Government Changing?
The short answer: nothing new.
VAT has existed in Nigeria for over 30 years. What has changed is how consistently it is being enforced, especially across digital and fintech platforms.
Some institutions had not been actively deducting VAT on applicable service fees, which is why many users are only noticing it now.
A Brief History of VAT in Nigeria
VAT was introduced in Nigeria in 1993 under the Value Added Tax Act, replacing the old sales tax system.
The goal was to create a more efficient way for the government to generate revenue by taxing the consumption of goods and services, rather than income.
Key milestones include:
- 1993: VAT introduced at 5%
- February 2020: VAT increased to 7.5% under the Finance Act 2019
- Present: 7.5% remains the applicable VAT rate
Are Banking Transactions Taxed? Not Exactly
Under the VAT Act, VAT is charged on taxable goods and services, with certain exemptions clearly stated.
Importantly:
- Financial services themselves are not taxed
- Fees charged for providing those services are subject to VAT
This distinction is at the heart of the current confusion.
Who Actually Pays VAT on Transfers?
According to Ilerioluwa Adebayo, an Associate Chartered Accountant and finance analyst at Aquantuo Nigeria Ltd, VAT on transfers is borne by the customer using the service.
“The person who transfers is the one paying the VAT because they are the consumer of the transfer service,” she explained. She stressed that VAT is an indirect tax, meaning it applies to the service fee, not the money being moved.
Your Money Is Not Being Taxed
This view is supported by Oluwaseyi Taiwo, who clarified that VAT never applies to deposits or transferred amounts. “Value Added Tax is an indirect tax levied on value addition from one stage to another, with the final consumer bearing the tax,” he said.
“At no point does VAT apply to deposits or the amount being transferred. It applies only to the fees charged by banks or fintechs for facilitating transactions.”
In Simple Terms: How VAT Affects You
Here’s what it means for your wallet:
- VAT is not deducted from your account balance
- VAT is not charged on deposits
- VAT is not charged on the amount you transfer
- VAT is added only to the service or processing fee
For example, if a bank charges ₦50 as a transfer fee, 7.5% VAT is added to that ₦50, not to the amount you’re sending.
Final Thoughts: No New Tax, Just Clearer Enforcement
The concern around the 7.5% VAT is understandable, especially in an environment where policy changes are often poorly communicated.
However, this is not a new tax and not a deduction from your money. What Nigerians are seeing is stricter enforcement of an existing VAT law that applies only to banking and fintech service fees. Understanding this distinction helps separate fact from speculation and keeps unnecessary panic about your wallet in check.
