VAT on bank charges: transfers not taxed – NRS

The Nigeria Revenue Service has clarified that the 7.5 percent Value Added Tax (VAT) will apply only to charges collected by banks for their services and not to the actual money transferred by customers.

The clarification followed widespread reports suggesting that VAT would be charged directly on bank transfers and other customer transactions, a claim the NRS described as incorrect and misleading.

In a statement issued on Thursday and made available to journalists, the revenue service said VAT has always applied to banking services under Nigeria’s tax system and was not introduced by the new Nigeria Tax Act.

The statement, signed by the Special Adviser on Media to the NRS Chairman, Dare Adekanmbi, said the new law did not create any fresh tax burden on bank customers.

“The Nigeria Tax Act did not introduce VAT on banking charges, nor did it impose any new tax obligation on customers in this regard,” the statement said.

According to the NRS, claims circulating in sections of the media that VAT is being newly imposed on electronic money transfers, banking fees, or commissions are false.

“The Nigeria Revenue Service wishes to address and correct misleading narratives circulating in sections of the media suggesting that Value Added Tax has been newly introduced on banking services, fees, commissions, or electronic money transfers. This claim is categorically incorrect,” it said.

The service explained that VAT has always applied to service charges collected by banks and other financial institutions.

“VAT has always applied to fees, commissions, and charges for services rendered by banks and other financial institutions under Nigeria’s long-established VAT regime,” the statement said.

It stressed that VAT is charged only on the service provided by the bank and not on the amount of money a customer transfers or withdraws.

“VAT is not charged on the amount of money transferred or withdrawn. It applies only to the service charge or commission imposed by the bank,” the NRS said. “For example, if a bank charges ₦10 for a transfer, VAT of 7.5 per cent, which is ₦0.75, applies to that ₦10 charge, not to the amount being transferred.”

The NRS also said interest earned on savings accounts, fixed deposits, and similar bank deposits is not subject to VAT.

“Interest income is not a supply of goods or services and therefore does not attract VAT under the Nigeria Tax Act,” the statement said.

Addressing concerns about the cost of living, the revenue service said basic food items and essential goods remain exempt from VAT under the law.

“The Nigeria Tax Act expressly exempts basic food items and essential goods from VAT to protect consumers and reduce the cost of living,” it said.

The NRS added that essential medical services, pharmaceutical products, tuition, and core educational services provided by recognised institutions are also exempt from VAT.

On what has changed under the current tax framework, the service explained that the focus is on compliance and enforcement rather than the introduction of new VAT rules.

“What changed is compliance and enforcement, not the law,” the statement said. “Financial institutions are being reminded of their existing obligation to remit VAT already charged and collected from customers.”

The NRS said the Nigeria Tax Act did not introduce any new VAT burden on ordinary Nigerians, especially in areas such as savings, food, healthcare, and education.

“The Act did not introduce VAT on savings, basic food, medical care, education, or essential consumption. Claims suggesting otherwise are misleading and incorrect,” it said.

The revenue service urged Nigerians to ignore false information and rely on official statements for accurate and up-to-date tax information.

“The Nigeria Revenue Service urges members of the public and all stakeholders to disregard misinformation and to rely exclusively on official communications for accurate, authoritative, and up-to-date tax information,” the statement added.