Recent announcements about the Federal Government’s directive on 7.5% Value Added Tax (VAT) on bank and fintech charges have caused confusion among many Nigerians regarding an aspect of Nigeria’s 2025 Tax Law. A common fear is that the government is now taxing the money people transfer. That is not the case.
Here is what the policy actually means — clearly and simply.
Your Transfer Amount Is Not Taxed
The VAT does not apply to the money you are sending or receiving.
If you transfer ₦100,000, the full ₦100,000 still reaches the recipient. The tax is not deducted from your funds, and the government is not taking a percentage of transferred money.
What VAT Applies To: The Service Charge
Banks and fintech companies charge fees for providing transaction services — such as:
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Transfer charges
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Account maintenance fees
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Electronic banking and payment processing fees
The 7.5% VAT is applied only to these service charges, not to the transaction value.
Simple Example
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Amount transferred: ₦50,000
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Bank transfer fee: ₦50
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VAT (7.5% of ₦50): ₦3.75
The recipient still gets ₦50,000.
The VAT is calculated only on the ₦50 service fee.
Who Actually Pays the VAT? The Merchant
Under Nigeria’s VAT system, the merchant providing the service pays the VAT to the government.
In this case:
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The bank or fintech charges a service fee
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It calculates 7.5% VAT on that fee
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It remits the VAT to the government
Customers are not responsible for remitting VAT. Financial institutions are.
Why This Is Being Emphasised Now
Banks have long deducted VAT on certain charges. What has changed is enforcement across the digital economy, particularly for fintech companies and payment platforms.
The tax authorities want:
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Uniform VAT compliance across banks and fintechs
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Reduced tax leakages from digital financial services
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A level playing field between traditional banks and fintech operators
This is not a new tax — it is stronger enforcement of an existing one.
Does This Increase the Cost of Banking?
Only slightly, and only on the service charge.
There is:
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No VAT on money transferred
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No VAT on deposits or savings
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No VAT on interest earned
Any increase reflects VAT being properly applied to fees that already exist. The misunderstanding is one of the long list of misconceptions about Nigeria’s 2025 new tax legislation.
The Bottom Line
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The 7.5% VAT does not reduce the amount you are transferring
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It applies only to bank and fintech service charges
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Banks and fintechs remit the VAT, not customers
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The policy improves compliance — it does not introduce a new tax
