Rumors regarding an additional 7.5% Value Added Tax (VAT) on banking transactions have circulated among Nigerians, sparking confusion and concern. These discussions gained traction following an SMS message from Moniepoint to its customers on January 14th, which stated:
“Update: New VAT on your banking fees. A 7.5% VAT will apply to some banking fees starting from January 19th, 2026, as required by the government. This is not a Moniepoint price increase. Learn more in your email.”
This message led to widespread questions: Is this a new tax? Will transfers become more expensive? Will every naira moving in or out of accounts be taxed? To address these concerns, Moniepoint sent a follow-up email to some customers, clarifying the situation.
The email explained that the change was an upcoming, government-mandated regulatory update concerning Value Added Tax (VAT), and not a new charge introduced by Moniepoint itself. Moniepoint emphasized that it was merely complying with a federal tax requirement. Similar notices were sent by other financial institutions, reiterating this compliance. The VAT implementation, as outlined by Moniepoint, is set to affect POS transaction fees, Mobile banking fees, USSD transaction fees, POS activation fees, Card Issuance fees, and Loan Processing & Documentation fees.
Despite these clarifications, many Nigerians remained concerned about the specifics of the government's directive and the history of VAT in the country.
The Existence and History of the 7.5% VAT
Yes, a 7.5% VAT does exist, and it is not a new tax. VAT has been a part of Nigeria's tax system for over 30 years. The application and consistency of its enforcement, particularly on digital and financial platforms, have evolved over time. Moniepoint's announcement stems from its previous practice of not actively deducting this tax, necessitating the current notification.
Value Added Tax (VAT) was initially introduced in Nigeria in 1993 under the Value Added Tax Act, replacing the former sales tax system. This law was designed to provide a more efficient and broad-based revenue generation method for the government by taxing the consumption of goods and services, rather than income.
The VAT rate remained at 5% for over two decades. In February 2020, the Nigerian government increased this rate to 7.5% through the Finance Act of 2019. This 7.5% rate is the current applicable rate.
According to the VAT Act, VAT is levied on the supply of taxable goods and services within Nigeria, with specific exemptions detailed in the law. While financial services themselves are not directly taxed, the fees associated with providing these services are subject to VAT.
Who Bears the 7.5% VAT on Transfers?
The individual initiating the transfer is responsible for paying the VAT on transfers.
Ilerioluwa Adebayo, an Associate Chartered Accountant and Finance Analyst at Aquantuo Nigeria Ltd, explained that VAT on transfers is borne by the customer paying for the service. She stated, "The person who transfers is the one paying the VAT because they are the consumer of the transfer service."
Crucially, VAT is not charged on the amount of money being sent, but rather on the service fee levied by the bank or fintech for processing that transfer. For instance, if a platform charges ₦50 as a transfer fee, the 7.5% VAT is applied only to that ₦50, not to the entire sum being transferred.
This structure aligns with global VAT practices, where the service provider collects the tax, but the ultimate financial burden falls on the customer utilizing the service.
Impact of VAT on Bank Deposits and Transfers
The 7.5% VAT does not affect bank deposits or the principal amounts of transfers in the way many Nigerians might fear.
VAT is an indirect tax applied to value-added services, not to the money itself. The act of depositing money into an account or transferring funds between accounts is not directly taxable.
The VAT law specifies that VAT applies only to fees charged for services rendered, not to the underlying monetary amount.
Oluwaseyi Taiwo, an experienced financial professional, corroborated this view, stating, "Value Added Tax is an indirect tax levied on value addition from one stage to another, with the final consumer being the person who bears the tax. At no point does VAT apply to deposits or the amount being transferred."
He further clarified that VAT is applicable only to the fees charged by banks or service providers for facilitating transactions. Taiwo added, "VAT applies to the service of transfer or deposit, not the deposit or transfer itself. As such, only the fees charged by the bank or fintech are subject to VAT, and this VAT is paid by the consumer of that service."
In essence, if a bank or financial service provider charges a fee for processing a transfer or deposit, VAT will be added to that fee. It will not be deducted from your account balance, your deposit amount, or the sum you intend to send.
Final Thoughts
The widespread concern regarding the 7.5% VAT is understandable, particularly in a context where new policies can sometimes lack clear communication. However, it is important to note that this is not a new tax, nor does it involve deductions from deposits or transfers.
What Nigerians are experiencing is a more consistent enforcement of an existing VAT law. This law specifically applies to service fees charged by banks and fintech companies, not to the money itself. Differentiating between speculation and the actual application of the tax is key to understanding the situation and alleviating unnecessary financial anxieties.