In recent weeks, digital-banking customers and social media, especially on Twitter have raised concerns about deductions labelled as “VAT” on transfers and other charges. Some dangerously false narratives, which when you take a critical look, you’ll clearly see that they have been orchestrated and sponsored by malicious elements, have given the impression that the 7.5% Value Added Tax (VAT) is a new or arbitrary charge introduced by fintechs, or that it applies to the amounts customers send. These claims are misleading and deserve careful clarification which is the purpose of this piece.
First, it’s important to understand how VAT works in Nigeria’s financial sector today. VAT on fees and charges for financial services has long been part of Nigeria’s tax system. The then Federal Inland Revenue Service (FIRS) had issued information circulars on March 31, 2021 where it stated that VAT on Financial Services (Circular No. 2021/04) that most fees, commissions, and charges by financial institutions (banks, insurance companies, brokers) are subject to 7.5% VAT. This justifies a recent advertorial the Nigeria Revenue Service (NRS) which stated unequivocally that VAT was not newly introduced on banking service charges by recent tax reforms, and that it did not impose a new tax obligation on customers in that regard.
However what was left unsaid in that publication was that on the 12th of December, the tax agency had written to all financial institutions and payment gateways based on past meetings with operators that following from the new Tax Act, they were reminded of their mandatory obligations to collect, deduct and remit VAT at the prescribed rate. The Agency then gave an 18- day grace period to all players to configure and align their systems while directing full compliance with the directive with effect from January 19, 2026. And so, some fintechs sent messages to their customers in the spirit of clarity and transparency.
It must be said that what has changed is that in a bid to widen the tax net, microfinance banks and fintechs who were not obligated to deduct and remit said VAT before now, have now become compelled to do so. The enforcement and standardised collection of VAT across banks and fintech platforms including mobile transfers, USSD transaction fees, and card issuance fees with compliance deadlines issued by tax authorities. So why anyone would vilify any financial institution obeying the laws of the land beats my imagination.
For those who have raised questions around transparency and wrongly suggesting that fintechs are suddenly imposing new, unexplained costs on users – as it has been explained above, this is a matter of regulatory compliance, not a lack of transparency or customer exploitation. These VAT deductions are not new fees created by the companies themselves, and providers are not arbitrarily raising their prices.
In closing, two things that everyone must bear in mind as we move forward in this new tax climate – all stakeholders including fintech platforms and regulators must communicate better and clearly. Nigerians must refrain from peddling unsubstantiated claims and malicious narratives, it has no benefits for anyone and erodes trust in systems.
