NRS: Bank Transfers Exempt from VAT; Only Service Fees Chargeable
By Patience Ikpeme
The Nigeria Revenue Service (NRS) has issued a definitive clarification stating that the 7.5 percent Value-Added Tax (VAT) applies solely to bank service charges and not to the principal amount of money transferred or withdrawn by customers.
The tax authority moved to dispel widespread misinformation circulating in the public domain, which suggested that personal funds and direct transfers would be subject to new tax deductions.
In a statement released on Thursday, the NRS described these reports as incorrect and misleading, noting that VAT on banking services is a long-standing component of the nation’s fiscal regime.
Speaking through his Special Adviser on Media, Dare Adekanmbi, the NRS Chairman, Dr. Zacch Adedeji, noted that the Nigeria Tax Act did not introduce new obligations for bank customers but rather reinforced existing ones.
“The Nigeria Tax Act did not introduce VAT on banking charges, nor did it impose any new tax obligation on customers in this regard. The Nigeria Revenue Service (NRS) wishes to address and correct misleading narratives circulating in sections of the media suggesting that Value Added Tax (VAT) has been newly introduced on banking services, fees, commissions, or electronic money transfers. This claim is categorically incorrect,” the statement read.
The agency explained that VAT has consistently applied to fees, commissions, and charges for services rendered by banks and other financial institutions under Nigeria’s established VAT framework.
The upcoming Monday deadline serves as a timeline for all financial institutions—including commercial banks and fintech operators—to ensure full compliance with the collection and remittance of these taxes on their service fees.
To provide further clarity for the banking public, the NRS addressed several key areas of concern regarding daily financial activities.
“VAT is not charged on the amount of money transferred or withdrawn. It applies only to the service charge or commission imposed by the bank. For example, if a bank charges ₦10 for a transfer, VAT of 7.5% (₦0.75) applies to that ₦10 charge—not to the amount being transferred,” the statement clarified.
The Revenue Service also confirmed that interest earned on savings accounts, fixed deposits, and similar deposit accounts remains exempt from VAT, as interest income does not constitute a supply of goods or services.
Beyond financial services, the NRS noted that the Nigeria Tax Act continues to protect the purchasing power of citizens by exempting essential goods and services. Basic food items, medical and pharmaceutical products, and tuition fees for recognized educational institutions remain VAT-exempt to reduce the cost of living for ordinary Nigerians.
The agency attributed the recent public attention to the issue to a shift in enforcement rather than a change in the law. It noted that what has changed is the requirement for financial institutions to rigorously remit VAT already being collected from customers in line with the new regulatory framework.
“The Nigeria Revenue Service urges members of the public and all stakeholders to disregard misinformation and to rely exclusively on official communications for accurate, authoritative, and up-to-date tax information,” the statement concluded.
