How to Calculate VAT Penalty in Nigeria

What Is VAT Amount In Nigeria?

As of the moment this post was made, the standard rate of VAT in Nigeria has now gone up to 7.5%, which is the VAT rate for 2024. There is also a limited range of goods and services that are subject to VAT at the zero rate or are exempt from VAT.

Therefore, Nigeria will levy VAT at a standard rate of 7.5% on the supply of goods and services by registered vendors in 2024. A vendor producing taxable supplies worth more than R1 million per year must register for VAT.

Our website’s data shows that Nigeria recorded its peak quarterly VAT revenue in 2023, the highest amount since the federal government raised the VAT rate to 7.5% in 2019.

VAT Inclusive And VAT Exclusive Formula

It is important to note that the VAT tariff is added to the product price before VAT is added. To convert the price exclusive of VAT to the price inclusive of VAT, you can use the following formula: (Amount exclusive of VAT) * (1 + VAT percentage as a decimal) = Amount inclusive of VAT.

What Is The Current VAT In Nigeria?

In Nigeria, the Value Added Tax (VAT) is commonly known by its local name-Value Added Tax (VAT). There is a single VAT rate applied across the country, and it stands at 7.5%.

How Is VAT Calculated In Nigeria?

To add VAT to the price, you can use the following formula:

Price inclusive of VAT = Price exclusive of VAT × (1 + VAT rate as a decimal)

OR

Price inclusive of VAT = Price exclusive of VAT × (100 + VAT rate) / 100

Both formulas will yield the same result.

OR

Enter the price of goods excluding VAT, then multiply the cost of goods by 7.5% of the of the VAT rate.

Devide the number by 100 to get the cost of goods inclusive of VAT in Nigeria.

The result of your calculation is your VAT price, including VAT. For Example: NGN (Nigerian Dollar) 175 / 15 x 100 = NGN (Nigerian Dollar) 203.00. This means the VAT amount at the 7.5% NGN (Nigerian Dollar) rate is R 28,00.

Goods and services that are charged VAT in Nigeria 

Every individual living in or visiting Nigeria is supposed to pay value-added tax (VAT) on all locally produced or imported goods and services provided within the country, unless those are specifically exempted under the law.

Goods and services exempted from VAT under the VAT Act in Nigeria

Medical services
Community banks provide services.
People’s banks and mortgage institutions
Plays and performances conducted by educational institutions as part of learning process
All export services

Conclusion:

In summary, VAT is mandatory for all citizens and residents of Nigeria on goods produced or imported into the country and services rendered within its borders, unless exempted by law.

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