January 30, 2026

VAT Increase on Goods and Services Are Now Taxable: What You Need To Know.

by Ekosolicitors

Is there a VAT increase on goods and services? The Nigerian tax landscape has undergone a major overhaul with the Nigeria Tax Act (NTA) 2025, which officially took effect on January 1, 2026. This Act consolidates several previous laws including the Finance Acts of 2020–2023 and introduces significant changes to what is taxable under the Value Added Tax (VAT) system

VAT Increase on Goods & Services In 2026

While the standard VAT rate remains at 7.5%, the new law broadens the “tax net” to include modern digital transactions and clarifies the status of essential goods. One of the most notable changes is the reclassification of many essential items from “Exempt” to “Zero-Rated,” which, while still resulting in 0% VAT for consumers, allows businesses to claim Input VAT credits on their production costs.

This article examines the key provisions of the NTA 2025, highlighting what goods and services are now taxable, what remains zero-rated or exempt, and what these changes mean for businesses and consumers.

Section 144: General Imposition of VAT Increase On Goods & Services

Section 144 of the Nigerian Tax Act, 2025 states:

“Value Added Tax (VAT) is imposed in accordance with the provisions of Chapter Six of this Act.”

What This Means:

This section provides the fundamental legal authority for imposing VAT in Nigeria. It establishes that VAT applies to all supplies of goods and services within the country unless they are specifically exempted or zero-rated under other provisions of the Act. This broad provision ensures that the tax system captures a wide range of economic activities, creating a comprehensive framework for VAT administration.

The significance of this section lies in its all-encompassing nature—it sets the default position that everything is taxable unless the law says otherwise. This approach helps prevent tax avoidance through ambiguous interpretations and ensures that new types of goods and services, particularly in the digital economy, fall within the VAT system.

Section 151: Taxable Supply by Non-Residents (The “Netflix Tax”)

Section 151(1) of the Nigerian Tax Act, 2025 states:

“A non-resident person who makes taxable supplies to Nigeria shall register for tax and include VAT on its invoice for all taxable supplies.”

What This Means:

This is perhaps the most significant new provision for everyday consumers. Often referred to as the “Netflix tax” or “Google tax,” this section targets foreign companies providing digital services to Nigerian customers. Under this provision, non-resident companies such as streaming platforms (Netflix, Spotify, Amazon Prime), cloud service providers (Google Cloud, Dropbox), social media advertising platforms (Facebook, Instagram), and software vendors must now register with Nigerian tax authorities and charge 7.5% VAT on their services.

Previously, many of these digital services operated in a gray area where VAT compliance was unclear or unenforced. The new law closes this gap, ensuring that digital transactions are treated the same as traditional goods and services. This means Nigerian consumers will now see VAT explicitly included in their subscription fees and digital purchases.

For businesses, this levels the playing field between local and international service providers, as both are now subject to the same VAT obligations. It also significantly expands the government’s tax base to capture the rapidly growing digital economy.

Beyond streaming services, this provision also covers:

Cryptocurrency and Digital Assets: The disposal of digital assets is now a taxable event, with VAT applicable on service fees or commissions charged by exchanges and platforms.
Online Marketplaces: Platforms like Jumia and Konga are now responsible for collecting and remitting VAT on behalf of vendors using their platforms.
Banking and Fintech Fees: Service fees charged by banks and fintech platforms for transfers, bill payments, and other transactions are subject to strict VAT enforcement.

Section 187: Zero-Rated Goods and Services (0% VAT)

Section 187 of the Nigerian Tax Act, 2025 states:

“Subject to paragraph 2 of the Thirteenth Schedule to this Act, the following taxable supplies are charged to VAT at the rate of 0% – (a) basic food items; (b) all medical and pharmaceutical products including medicinal herbal products; (c) educational books and materials; (d) fertilisers; (e) locally produced agricultural chemicals; (f) locally produced veterinary medicine; (g) locally produced animal feeds; (h) live cattle, goats, sheep and poultry;

(i) agricultural seeds and seedlings; (j) electricity generated by generation companies (GENCOs) and supplied to National Grid or Nigeria Bulk Electricity Trading Company (NBET); (k) electricity transmitted by Transmission Company of Nigeria (TCN) to Electricity Distribution Companies (DISCOs); (l) medical services, (m) tuition relating to nursery, primary, secondary or tertiary education (n) exported goods excluding oil and gas; (o) exported services; (p) exported incorporeal property; (q) medical equipment; (r) electric vehicles; and (s) parts, semi-knock-down units for the assembly of Electric Vehicles.”

What This Means:

This section represents a fundamental shift in how essential goods and services are treated under Nigerian tax law. Many items previously classified as “Exempt” have been moved to “Zero-Rated” status. While this distinction might seem technical, it has enormous practical implications for businesses.

The Key Difference:

Exempt items: No VAT is charged to the consumer, and the business cannot claim back any VAT paid on inputs (raw materials, equipment, etc.) used in production.
Zero-rated items: No VAT is charged to the consumer (0%), but the business can claim refunds on all VAT paid during the production process.

This change is a significant win for manufacturers and suppliers of essential goods. For example, a bread manufacturer can now recover the VAT paid on flour, yeast, packaging materials, and equipment. This reduces production costs, potentially leading to lower prices for consumers and improved competitiveness for local businesses.

Items covered under Zero-Rating include:

Basic Food Items: Additives, bread, cereals, cooking oils, fish, flour, fruits, meat, milk, nuts, pulses, roots (such as yam and cassava), salt, vegetables, and water.
Healthcare: All medical and pharmaceutical products (including medicinal herbal products), medical services, and medical equipment.
Education: Educational books and materials, as well as tuition relating to nursery, primary, secondary, or tertiary education.
Agriculture: Fertilizers, locally produced agricultural chemicals, locally produced veterinary medicine, locally produced animal feeds, live cattle, goats, sheep, poultry, and agricultural seeds and seedlings.
Energy and Electricity: Electricity generated by generation companies (GENCOs) and supplied to the National Grid or Nigeria Bulk Electricity Trading Company (NBET), as well as electricity transmitted by the Transmission Company of Nigeria (TCN) to Electricity Distribution Companies (DISCOs).
Exports: Exported goods (excluding oil and gas), exported services, and exported incorporeal property remain zero-rated to encourage international trade and make Nigerian products more competitive globally.
Electric Vehicles and Green Technology: Electric vehicles, as well as parts and semi-knock-down units for the assembly of electric vehicles, are zero-rated. This incentive is designed to promote the adoption of environmentally friendly transportation and support Nigeria’s climate goals.

VAT Increase: Other Notable Changes

Non-Permanent Structures Now Taxable:

The definition of “building” has been narrowed under the new Act. Items such as radio and television masts, cell towers, and mobile homes are no longer considered part of the “building” category and are now subject to VAT when traded or leased. This change captures a segment of the economy that was previously outside the VAT net.

Exempt Goods and Services (No VAT):

Some items remain completely outside the VAT system. These include:

Residential Rents: Rent paid on residential properties continues to be exempt.
Public Transportation: Fares for public transport remain VAT-free.
Renewable Energy Equipment: Solar panels and related renewable energy hardware are exempt to encourage adoption of clean energy.
Microfinance Services: Services provided by unit microfinance banks remain exempt to support financial inclusion for low-income earners.

For these exempt items, businesses cannot claim Input VAT credits, but consumers pay no VAT on the final product or service.

Wrapping: VAT Increase On Goods & Services in 2026

The Nigeria Tax Act 2025 represents a comprehensive modernization of the country’s VAT system, adapting it to the realities of the digital economy while providing relief to businesses producing essential goods. The expansion of the tax net to include digital services from non-resident providers ensures that the government captures revenue from the rapidly growing online economy, while the reclassification of essential goods to zero-rated status supports local manufacturers and potentially reduces costs for consumers.

For businesses, the key takeaway is the need to understand whether their goods or services fall under the taxable, zero-rated, or exempt categories, as this determines both their VAT obligations and their ability to claim Input VAT credits. Companies providing digital services, whether local or international, must ensure compliance with the new registration and remittance requirements.

For consumers, while the VAT rate remains at 7.5%, you will now see this tax explicitly applied to digital subscriptions, online services, and certain goods that were previously in gray areas. However, essential food items, healthcare, and education remain at 0%, protecting household budgets on critical expenses.

As with any major tax reform, businesses and individuals should consult with tax professionals to ensure full compliance and to take advantage of any benefits, such as Input VAT credits, that the new system offers. The NTA 2025 marks a significant step toward a more comprehensive, equitable, and modern tax system for Nigeria.

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