VAT in Practice: How Sections 152–158 of the Nigeria Tax Act (2025) Work — A Plain-English Guide by Baha’s Books

VAT in Practice: How Sections 152–158 of the Nigeria Tax Act (2025) Work — A Plain-English Guide by Baha’s Books

Nigeria’s Value Added Tax (VAT) system is designed to be simple in theory and rigorous in practice: VAT follows the money as goods and services move through the economy, and each business in the chain accounts for its part. Sections 152 to 158 of the Nigeria Tax Act, 2025 set out the practical rules that make this system work day-to-day — from the moment a sale is made, to the invoice that documents it, to the monthly remittance and the way a business recovers VAT it has already paid. This guide explains those rules clearly, using everyday language and grounded examples, so you can implement them confidently in your books and workflows.

1) Who actually “pays” VAT and what is Input VAT? (Section 152)

VAT is a consumption tax. The person buying a taxable good or service pays the VAT to the supplier at the point of supply. The supplier collects that VAT on behalf of the government.

From the buyer’s perspective, that VAT paid is called input VAT. Think of input VAT as the VAT your business incurs on its own purchases and expenses — raw materials, subcontracted services, utilities for production, eligible fixed assets, and so on. You record input VAT because, later, you will compare it to the VAT you collect from your customers (output VAT). That difference determines what you remit or what you can carry forward/refund.

Example:
A registered catering business buys ingredients for ₦1,000,000 plus VAT of ₦75,000 (7.5%). The ₦75,000 is input VAT in the buyer’s records.

2) What a valid VAT invoice must contain — and why it matters (Section 153)

A VAT system is only audit-proof if every supply is supported by a compliant invoice. Section 153 requires suppliers to issue a VAT invoice for every taxable supply, whether or not the customer has paid yet. It also requires sequential invoice numbering, which prevents gaps and manipulation.

A valid VAT invoice must show all of the following, at minimum:

  • Supplier’s Tax Identification Number (TIN)

  • The invoice number

  • Supplier’s name and address

  • Supplier’s incorporation or business registration number (as applicable)

  • Date of supply

  • Name of the purchaser or client

  • Gross amount of the transaction

  • The VAT rate and the VAT amount charged

Issuance can be by the supplier or by a person appointed by the Federal Inland Revenue Service (FIRS). And FIRS may direct businesses to adopt electronic invoicing, with at least 30 days’ notice. Electronic invoicing improves accuracy, reduces disputes, and speeds up audits because the invoice data is structured and traceable.

Example:
You render consulting services on 20 March. You must issue a VAT invoice on that date (or when the service becomes available), not only when the client pays in April. The VAT liability is anchored to the time of supply, and the invoice is the legal trigger.

3) Charging and collecting VAT — Output VAT is not your revenue (Section 154)

When your business makes a taxable supply, you must charge 7.5% VAT and collect it from your customer. The VAT you collect is output VAT. It is not income; it is a liability you hold in trust for the government until you remit it.

Example:
You sell goods for ₦2,000,000 plus VAT of ₦150,000. In your books:

  • Sales revenue: ₦2,000,000

  • Output VAT payable: ₦150,000
    That ₦150,000 belongs to FIRS; it should never be treated like profit.

4) When others must withhold, self-account, or remit VAT (Section 155)

The Act goes beyond suppliers to ensure VAT is never lost.

Government MDAs and appointed persons. Federal, State and Local Government bodies, and any person appointed by FIRS, may be required to collect or withhold VAT on taxable supplies made to them and remit to FIRS within the statutory time.

Self-accounting. If you receive a taxable supply in Nigeria and the invoice omits VAT (perhaps the supplier failed to charge it), FIRS can direct you — the recipient — to self-account. You compute the VAT on the consideration, remit it directly to FIRS, and keep the schedule to prove it.

Remittance schedule. Any VAT that is collected, withheld, or self-accounted must be remitted on or before the 14th day of the month following the month of the transaction. The remittance must be accompanied by a schedule listing the supplier/contractor names, TINs, invoice numbers, gross amounts, VAT amount, and the month the VAT relates to.

Record-keeping duty. Anyone with an obligation to collect or withhold VAT must keep proper records and file returns with the same discipline expected of a taxable person. Once you touch VAT, you bear the compliance duty.

Example:
A ministry buys IT equipment and withholds VAT from the supplier’s invoice. The ministry must remit the withheld VAT to FIRS by the 14th of the following month with a complete schedule. If the supplier “forgot” to charge VAT, FIRS may direct the ministry to self-account instead — the VAT still reaches FIRS.

5) Netting off VAT — Input credit, refunds and time limits (Section 156)

VAT is meant to tax value added. That’s why you net output VAT against input VAT.

  • If output VAT > input VAT, you remit the difference to FIRS in your monthly return.

  • If input VAT > output VAT, you carry the excess forward as a credit against future VAT. You may also apply for a refund of excess VAT not utilized as credit, supported by evidence FIRS may require.

Special cases covered by Section 156:

  • Importers must pay VAT on imported goods before clearance.

  • Zero-rated supplies (e.g., qualifying exports): the business pays VAT on inputs during production and can later request a refund of that input VAT, restoring neutrality for exporters.

  • Eligibility and apportionment: Input VAT is deductible only to the extent it was incurred for making taxable supplies. If expenses relate to both taxable and exempt activities, you must apportion and deduct only the portion attributable to taxable supplies.

  • Five-year window: Input VAT can be claimed as a deduction within five years from the end of the tax period in which it was incurred.

  • Prospective limit: Deductible input VAT is limited to taxable supplies made from the commencement of the Act; legacy periods are excluded.

Example:
A furniture manufacturer’s March return shows output VAT of ₦220,000 and input VAT of ₦260,000. The business reports a ₦40,000 excess input VAT. It can carry this forward to April or apply for a refund with proper documentation. If 30% of its electricity bill powers an exempt activity, only 70% of the VAT on that bill is deductible.

6) Business transfers and continuity of VAT obligations (Section 157)

When a trade, business, profession or vocation is sold or transferred as a going concern, the VAT obligations travel with it. Section 157 imports the rules of Section 190 so that the new owner steps into the shoes of the old owner for VAT compliance — including any outstanding liabilities, records, and documentary obligations. Due diligence at acquisition should therefore include a careful review of VAT positions and remittance history.

7) Fiscalization — real-time, tamper-proof VAT (Section 158)

Fiscalization brings your point-of-sale and invoicing into a secure, FIRS-approved digital environment. Under Section 158, taxable persons must implement an approved fiscalization system developed in line with the Nigeria Tax Administration Act, 2025. In practice this means using certified devices or software that:

  • Generate compliant VAT invoices with the right fields and sequential numbers,

  • Record each transaction securely, and

  • Transmit summary data to FIRS, enabling real-time or near-real-time oversight.

Fiscalization reduces errors, eliminates phantom invoices, streamlines audits, and protects honest businesses from being undercut by non-compliant competitors.

Example stack:
A retail chain deploys certified POS devices in all outlets. Each receipt embeds a fiscal signature. End-of-day summaries sync to a secure FIRS endpoint. The finance team reconciles output VAT and input VAT monthly, supported by an electronic trail that matches inventory, invoices, and bank settlements.

8) Putting it all together — a month in the life of a compliant VAT filer

  1. During the month: Your business issues VAT invoices for every taxable supply, collects 7.5% VAT, and records it as output VAT. Purchases and expenses that relate to taxable activities are booked with input VAT. If you buy from a supplier who failed to charge VAT and FIRS has directed you to self-account, you compute and hold that VAT for remittance.

  2. By the 14th of the next month: You file your VAT return. You remit the net VAT (output minus allowable input). Where you withheld or self-accounted for VAT, you include the required schedule with TINs, invoice numbers, amounts and month of supply.

  3. If input VAT exceeds output VAT: You carry the excess forward or apply for a refund with supporting documentation.

  4. Continuously: You keep orderly records, preserve the five-year window for input claims, maintain sequential e-invoices, and ensure your fiscalization system remains certified and operational.

9) What this means for SMEs and finance teams

  • Treat VAT as a flow-through: it passes through your books but it isn’t profit.

  • Build your invoice discipline: the invoice is the legal anchor for VAT timing and is non-negotiable.

  • Align purchases to taxable outputs: if you make exempt supplies, plan for apportionment.

  • Close the gap with self-accounting when suppliers slip — compliance is measured on what reaches FIRS, not only on what you were charged.

  • Modernize through electronic invoicing and fiscalization: fewer disputes, faster refunds, cleaner audits.

Final Word from Baha’s Books

Sections 152–158 of the Nigeria Tax Act, 2025 turn VAT from a general principle into a repeatable process you can run every month: collect correctly, invoice correctly, record correctly, remit on time, and recover what you’re entitled to. When you set up your chart of accounts to separate input VAT, output VAT, and VAT control; when you insist on complete VAT invoices; and when your systems are fiscalized and reconciled, VAT becomes predictable — and compliance becomes part of your operating rhythm rather than a scramble.

Modern Accounting. Smarter Tax. Seamless Compliance.
That’s the standard we believe every Nigerian business can reach with the right structure and the right habits.

Learn more about simplifying your accounting and compliance systems at
bahasbooks.com

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