No VAT on Bank Transfers, Only Service Charges Are Taxable – NRS
The Nigeria Revenue Service (NRS) has clarified that Value Added Tax (VAT) does not apply to bank transfers, stressing that the tax is charged only on service fees and commissions collected by financial institutions, not on the actual funds being moved. The clarification follows growing public concern after several bank customers noticed VAT deductions on transaction charges and mistakenly believed the government had introduced a new tax on electronic transfers.
In a statement issued to address the confusion, the NRS explained that VAT on banking services is not new and has been part of Nigeria’s tax framework for years. What is taxable, the agency noted, are the fees banks charge for providing services such as transfers, account maintenance, card issuance, SMS alerts, and USSD transactions. The principal amount a customer sends or receives remains fully exempt from VAT.
According to the NRS, the misunderstanding arose from recent efforts to strengthen compliance across the financial sector, especially as digital transactions continue to grow. Banks and fintech companies have been reminded of their obligation to collect and remit VAT on eligible service charges, which may have drawn more attention from customers seeing VAT reflected more clearly on transaction notifications.
The revenue agency emphasized that the Nigeria Tax Act did not introduce any fresh VAT burden on banking customers, contrary to claims circulating on social media. Instead, it reinforced existing provisions that require VAT to be applied strictly to services rendered, not to money itself. For example, when a bank charges a ₦50 or ₦100 fee for a transfer, VAT is calculated only on that charge, not on the amount being transferred, whether ₦5,000 or ₦500,000.
The NRS also reassured Nigerians that interest earned on savings accounts, fixed deposits, and similar financial instruments remains VAT-exempt, as such earnings do not fall under taxable supplies of goods or services. This position aligns with longstanding tax rules and global best practices in financial taxation.
By clearing the air, the NRS said it hopes to restore confidence and encourage the public to rely on official information rather than unverified reports. The agency added that while enforcement of VAT remittance by financial institutions is being strengthened, customers should not interpret improved transparency on charges as the introduction of a new tax.
Ultimately, there is no VAT on bank transfers in Nigeria. Customers are only paying VAT on the service fees charged by their banks, just as they have for years. As Nigeria continues to expand its digital economy, the NRS maintains that clarity, compliance, and public trust remain central to its approach to tax administration.
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