Nigeria Tax Act 2025 Explained: Stamp Duties, VAT, and the Modern Framework for Tax Compliance

Nigeria Tax Act 2025 Explained: Stamp Duties, VAT, and the Modern Framework for Tax Compliance

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1. Closing the Chapter on Stamp Duties — Ensuring Transparency in Every Transaction

The Nigeria Tax Act, 2025, in its closing sections of Chapter 5, refines the legal and administrative rules guiding stamp duties on instruments such as agreements, leases, conveyances, and other formal documents that record ownership, obligations, or value exchange.

Section 140 – Duplicates and Authentic Stamping

Section 140 makes it clear that no duplicate or copy of a chargeable document is valid for legal use unless it bears the same official stamp as the original or is certified by the tax authority as having had the full duty paid.
This provision was introduced to block a long-standing loophole — the use of multiple unstamped copies of the same document to evade paying additional duties. The only acceptable exception occurs when the Federal Inland Revenue Service (FIRS) or relevant tax authority officially certifies that full payment has been made on the principal instrument.

Section 141 – Multiple Transactions in One Document

When a single legal instrument contains multiple unrelated transactions, each transaction must attract its own stamp duty.
For instance, if a single deed covers both the sale of land and the lease of another property, each is treated as an independent taxable event.
This ensures transparency and traceability, while also preventing under-declaration of duties through document bundling.

Section 142 – Multiple Instruments for a Single Transaction

Section 142 addresses the situation where several copies or versions of an instrument are executed for the same transaction — say, three identical copies of a property sale agreement.
In such cases, the relevant tax authority may determine that only one of the instruments will bear the ad valorem duty (a duty based on the transaction’s value), while the other copies are treated as counterparts and stamped at flat rates as prescribed in the Ninth Schedule.
This keeps the system fair — you pay duty once for the transaction, not multiple times for each signed copy.

Section 143 – Non-Monetary Consideration

Sometimes, transactions don’t involve money but still have measurable value — for example, exchanging land for company shares or providing a service in return for property.
The law calls this ad valorem duty on non-monetary consideration, meaning stamp duty must still be paid based on the market value of what was exchanged.
By capturing barter-style deals and in-kind transactions, Nigeria ensures that every form of value transfer contributes fairly to government revenue.

These provisions collectively modernize Nigeria’s stamp duty regime — ensuring that all forms of value, from paper deeds to digital exchanges, are traceable, fair, and duly accounted for.

2. Transition to Value Added Tax (VAT) — A Modern Approach to Consumption Tax

Following the stamp duty framework, Chapter 6 of the Nigeria Tax Act 2025 introduces the Value Added Tax (VAT) regime — the country’s principal consumption tax on goods and services supplied in Nigeria.

Section 144 – Introduction of VAT

VAT is formally imposed under this chapter, applying to taxable supplies of goods and services carried out in Nigeria, except where exemptions are specifically provided in later sections.
This ensures that VAT operates as a broad-based consumption tax, targeting the value added at every stage of production or service delivery.

Section 145 – Scope and Charge

VAT applies to all taxable supplies in Nigeria, unless exempted.
This means that every sale of goods, provision of services, or commercial exchange is subject to VAT — unless it falls within clearly defined exemptions such as medical supplies, educational materials, and charitable services.
It creates a unified framework for taxation across sectors and removes ambiguity in determining who is liable.

3. Understanding the Place and Time of Supply

Section 146 – Where the Supply Takes Place

For goods, VAT applies if:

  • The goods are physically present or imported into Nigeria, or

  • The beneficial owner is a taxable person in Nigeria, even if the goods are abroad.

For services, VAT applies if:

  • The service is provided to or consumed by a person in Nigeria, even if rendered abroad;

  • The service is tied to immovable property in Nigeria (e.g., construction or valuation); or

  • The service involves intangible assets like intellectual property, if they are registered, licensed, or exploited in Nigeria.

This ensures that services like digital advertising, consultancy, and software licensing used by Nigerians are properly captured under VAT — closing historical loopholes around cross-border digital transactions.

Section 147 – When VAT Becomes Due

VAT becomes payable at the earliest of:

  • The issuance of an invoice,

  • The receipt of payment, or

  • The delivery of goods or services.

If the supplier and buyer are related parties (for example, group companies), VAT applies once the goods or services are available for use, even without an invoice.
For recurring supplies — such as leases, rentals, or construction projects — VAT applies progressively as payments are made. This aligns tax collection with real-time cash flow, making compliance more practical and transparent.

4. VAT Rate and Value Determination

Section 148 – VAT Rate

The standard VAT rate in Nigeria remains 7.5%, charged on the value of taxable goods and services, unless otherwise exempted.

Section 149 – Determining the Value of Supply

When a transaction is straightforward and money-based, VAT is calculated on the amount paid or payable (including VAT).
However, when value is exchanged in non-cash form, such as trading goods or offering services in return for another, the law requires using the market value of the consideration.
This also applies to related-party transactions — ensuring the value used for VAT is what would have been charged in an arm’s-length transaction, eliminating opportunities for tax avoidance.

5. VAT on Imported Goods and Cross-Border Supplies

Section 150 – VAT on Imported Supplies

For imported goods and services, VAT is applied to the landed cost — which includes:

  • The purchase price,

  • Customs duties, levies, commissions, transport, insurance, and related expenses, up to the port of entry.
    This ensures the entire cost of importation is captured in the tax base.

Section 151 – Non-Resident Suppliers and Digital Commerce

One of the most forward-looking provisions of the Act is the treatment of non-resident suppliers.
If a foreign company sells goods or provides services to Nigerian customers, it must:

  1. Register for VAT in Nigeria,

  2. Charge VAT on its invoices, and

  3. Remit the VAT to the Federal Inland Revenue Service (FIRS).

If the non-resident does not comply, the Nigerian recipient must withhold and remit the VAT on the supplier’s behalf.
This is particularly relevant for digital platforms like Amazon, Alibaba, and Netflix — where goods or services are consumed in Nigeria but supplied by non-resident entities.

The Act further empowers FIRS to:

  • Appoint any person or platform to collect VAT on its behalf,

  • Issue detailed guidelines for how these rules apply, and

  • Prevent double taxation by ensuring that once VAT has been collected at the digital point of sale, it will not be charged again during customs clearance.

6. Why These Changes Matter

The Nigeria Tax Act 2025 represents a complete modernization of Nigeria’s tax ecosystem.
By combining the formality of stamp duties with the dynamism of VAT, the Act ensures:

  • All forms of value exchange — cash or non-cash — are captured;

  • Legal documents and transactions are validated and traceable;

  • Cross-border digital commerce is effectively regulated; and

  • Businesses and taxpayers are treated fairly under clear, enforceable rules.

For businesses, this means stronger compliance obligations — but also clearer guidance and protection under the law.
For government, it means improved revenue assurance in an increasingly digital and global economy.
And for accountants, tax consultants, and business owners, it reinforces the principle that compliance and structure are the foundation of credibility.

Final Thought from Baha’s Books

At Baha’s Books, we believe every business — big or small — should understand not just how to pay tax, but how the law behind it works.
Understanding these sections of the Nigeria Tax Act 2025 helps you make informed business decisions, avoid penalties, and structure your operations for compliance and sustainability.

To learn more about accounting, taxation, and regulatory setup for your business, visit bahasbooks.com

Or send us a message, we’ll help you simplify your numbers, strengthen compliance, and grow your business with confidence.

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