Understanding Nigeria’s Modern VAT Framework: A Professional Analysis of Sections 152–158 of the Nigeria Tax Act 2025. The Nigeria Tax Act 2025 (NTA 2025) represents one of the most far-reaching reforms to Nigeria’s tax system in decades. Among its critical updates, the provisions on Value Added Tax (VAT), contained in Sections 152–158, establish a more robust, transparent, and technology-driven VAT regime.
These provisions redefine how businesses record, collect, remit, and claim VAT within Nigeria.
This article provides an expert explanation of these sections, highlighting their implications for businesses, tax professionals, and administrators.
Input VAT: Obligations of the Taxable Person (Section 152)
Under the NTA 2025, a taxable person is required to pay VAT on taxable supplies received from a supplier. This VAT paid on purchases is known as Input VAT. The law formally recognises Input VAT as the taxpayer’s claimable credit, subject to specific conditions outlined later under Section 156.
Key implication: Businesses must ensure that all purchases on which they intend to claim Input VAT are properly supported by compliant VAT invoices, and that the supplies relate to taxable business activities.
Mandatory VAT Invoicing Requirements (Section 153)
The Act introduces strict VAT invoicing rules to standardise documentation and prevent irregular practices.
Each VAT invoice must contain:
Supplier’s Tax Identification Number (TIN)
Sequential invoice number
Supplier’s name and address
RC/BN number
Date of supply
Name of purchaser
Gross transaction amount
VAT charged and rate applied
The section mandates that invoices be issued whether or not payment has been made, ensuring that VAT liability is based on the time of supply, not the time of payment.
Furthermore, the FIRS is empowered to mandate the use of electronic invoicing with a minimum notice period of 30 days.
Key implication: Businesses must adopt proper invoicing systems and prepare for an environment where manual invoices will be phased out in favour of e-invoicing and digital VAT compliance.
Output VAT and VAT Collection Duties (Section 154)
A taxable person making taxable supplies must collect VAT at the rate prescribed in Section 148. The VAT collected on these outward supplies is known as Output VAT.
Key implication: Output VAT represents tax collected on behalf of the government. Failure to charge or remit it constitutes non-compliance and exposes the business to penalties.
VAT Withholding, Self-Accounting, and Remittance (Section 155)
This section significantly strengthens VAT collection by assigning withholding and self-accounting responsibilities to specific persons.
VAT Withholding Agents
The following entities must withhold or collect VAT on taxable supplies made to them:
- Federal Government
- State Governments
- Local Governments
- Ministries, Departments, and Agencies (MDAs)
- Any other person appointed by the Service
If a supplier fails to charge VAT, the FIRS may direct the purchaser to self-account, meaning the purchaser computes and remits the VAT.
VAT withheld or self-accounted must be remitted to the FIRS on or before the 14th day of the month following the transaction, accompanied by a schedule containing supplier details, invoice numbers, and VAT amounts.
Key implication: This framework reduces VAT leakage and shifts responsibility for compliance to both suppliers and receivers of taxable goods and services.
VAT Credits, Offsets, and Refunds (Section 156)
Section 156 represents the heart of VAT administration by setting out how VAT liabilities are computed.
a. Output VAT exceeds Input VAT
The taxable person must remit the excess to the FIRS.
b. Input VAT exceeds Output VAT
The excess becomes a VAT credit that can be carried forward and offset against future VAT liabilities. Unutilised credits may also be refunded upon request and presentation of supporting documents.
c. Zero-Rated Supplies
Entities engaged in zero-rated supplies (e.g., exporters) may apply for a refund of VAT incurred on associated cost in the supplies of zero-rated supplies.
d. Conditions for Input VAT Deduction
Input VAT can only be deducted if:
- It is incurred to make taxable (not exempt) supplies.
- It relates to goods or services consumed for taxable activities.
- It is supported by a compliant VAT invoice.
- It is claimed within five years of the tax period in which it was incurred.
- For businesses making both taxable and exempt supplies, only the proportion relating to taxable supplies is deductible.
e. Import VAT
Importers must pay VAT before clearing taxable goods from customs.
Key implication: Section 156 modernises the VAT credit system to align with global best practices, providing clarity on recoverable VAT and protecting government revenue from unwarranted claims.
Transfer of Business as a Going Concern (Section 157)
Section 157 applies the rules under Section 190 concerning the sale or transfer of a trade, business, or profession.
Key implication: Transfers of a business as a going concern may qualify for specific VAT treatment, helping to avoid cascading VAT in corporate restructuring and mergers.
Fiscalisation and Mandatory Electronic Monitoring (Section 158)
This section marks a major technological shift in VAT administration. All taxable persons making taxable supplies must implement(If within the threshold) the FIRS-approved fiscalisation system, which may include:
- Electronic fiscal devices
- Software solutions
- Secured network systems
- E-invoicing platforms
- Real-time data transfer tools
These systems enable automated reporting of VAT data directly to the FIRS.
Key implication: Nigeria is moving towards a Kenyan- and Rwandan-style VAT digitalisation model, significantly reducing the risk of invoice manipulation, under-reporting, and tax evasion.
Conclusion
Sections 152–158 of the NTA 2025 collectively introduce a modern, technology-driven approach to VAT compliance in Nigeria. Businesses are now expected to:
- Maintain structured VAT documentation
- Adopt e-invoicing and digital reporting tools
- Understand their expanded obligations under withholding and self-accounting rules
- Manage VAT credits proactively
- Upgrade internal systems to align with fiscalisation requirements
These reforms will not only boost Nigeria’s VAT efficiency and reduce leakages but also enhance transparency for taxpayers, simplify audits, and improve the overall integrity of the tax system.
Olatunji Abdulrazaq CNA,ACTI,ACIArb(UK)
Founder/CEO,Taxmobile.Online
