Nigeria Expands VAT to Digital Payments in Bid to Boost Revenue
Nigeria is ramping up efforts to capture more revenue by extending Value Added Tax (VAT) to digital payments, online services, and software subscriptions.
Under the new framework, the Federal Inland Revenue Service (FIRS) has begun enforcing VAT compliance on digital transactions (payments, SaaS, streaming, online platforms) — applying real-time VAT reporting, e-invoicing and oversight to what was once a largely untaxed economy.
This move reflects recognition that Nigeria’s digital economy has grown rapidly — and that taxing it can help close revenue gaps without raising VAT rates on traditional sectors.
The significance becomes clearer with recent data: in the second quarter of 2025 alone, about 22.3 percent of all VAT collected came from foreign-digital services used by Nigerians — such as streaming, cloud services and cross-border digital subscriptions.
Meanwhile, electronic payments continue to surge: as of July 2025, the value of e-payments in Nigeria hit ₦384 trillion, underscoring how much commerce has shifted online.
Under the new rules, both local businesses and foreign firms serving Nigerian customers must register, issue VAT-inclusive invoices, and remit VAT on services rendered.
For example, subscription-based services, digital marketplaces, delivery apps, payment platforms and any online service provider are now part of the VAT net.
By doing this, Nigeria aims to modernize its tax system, reduce revenue leakages, and tap into a fast-growing digital consumption base — turning digital transactions into a major, sustainable revenue source for the government.
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