The Exporter Who Didn’t Want to Pay VAT. One morning, a client walked into my office with a familiar look of concern on his face. He was a supplier of goods to a Nigerian company that exported products to customers overseas. What seemed like a straightforward commercial relationship had suddenly turned into a tax debate.
“My customer is refusing to pay VAT,” he explained. “They say because they are an exporter, my company should not charge them VAT on our invoice.”
It was a classic situation—one that many businesses and even experienced accountants encounter. The buyer was convinced that their status as an exporting company automatically made them exempt from VAT on their purchases.
My client, however, was unsure. He had heard that exports were treated differently under the Nigeria Tax Act 2025, but he wanted to confirm whether the buyer’s position was correct.
As I listened, I realized this was another opportunity to explain one of the most misunderstood principles of Value Added Tax.
I told him that under the relevant section of Nigeria Tax Act 2025 on VAT , the tax treatment of a transaction is not determined by who the buyer is. Instead, it depends on the nature of the supply and where the supply takes place. In other words, VAT follows the transaction, not the status of the customer.
I asked him to describe the transaction chain.
“Your company sells goods to the exporter here in Nigeria,” I said. “And then the exporter ships the goods abroad to their foreign customers.”
He nodded.
That small detail made all the difference.
From a VAT perspective, his company was making a local supply within Nigeria. The goods were being sold to another Nigerian company before they were exported. Therefore, under the VAT framework, the supply by my client remained a taxable domestic supply.
“In that case,” I explained, “your company must charge VAT on the invoice issued to the exporter.”
At first, he looked surprised. “But what about the export?”
That was the second part of the lesson.
Under the Nigeria Tax Act 2025, exports are treated as zero-rated supplies. This means the exporter will charge 0% VAT when selling the goods to the foreign buyer. However, because exports are zero-rated, the exporter is allowed to recover the VAT paid on purchases made locally.
In practical terms, the exporter pays VAT to the supplier but does not ultimately bear the cost. The VAT paid becomes input VAT, which the exporter can offset against other VAT liabilities or, where applicable, apply for a refund.
This mechanism is deliberate. It ensures that goods leaving the country do not carry the burden of domestic consumption taxes. VAT is designed to be borne by the final consumer within the country, not with respect to export.
By the end of our discussion, the issue had become clear.
My client’s responsibility was straightforward: charge VAT on the local sale. The exporter’s relief would come later through input VAT recovery, not through refusing to pay VAT at the point of purchase.
As my client prepared to leave, he smiled and said something that every tax adviser enjoys hearing.
“So the problem isn’t really VAT,” he said. “It’s misunderstanding VAT.”
Exactly.
In my years of practice, I have seen many disputes arise not because the tax rules are unclear, but because they are misunderstood.
Another day, another lesson in the quiet but fascinating journey I often call A Life in Tax.
Olatunji Abdulrazaq CNA,ACTI,ACIArb(UK)
Founder/CEO,Taxmobile.Online
