Does a small Nigerian business have to charge VAT?
Nigeria's small-business VAT exemption under the 2025 tax Acts, why its turnover limit is disputed, and how a small business's invoices should show VAT.
By Achekam · · 4 min read · For Running a business businesses in Nigeria
A customer of a small catering business in Abuja asks for a "proper VAT invoice". A freelance developer in Lagos wonders whether the invoices she sends to an overseas client should add VAT. A boutique in Port Harcourt was registered for VAT years ago under the old rules and is not sure whether it still needs to file every month.
All three are asking the same question, and since 1 January 2026 the answer comes from Nigeria's new tax laws. This article sets out what the law says about small businesses and VAT at the time of writing, where it is unsettled, and how your invoices should look in Achekam.
The small-business exemption and opting in
The Nigeria Tax Act 2025 commenced on 1 January 2026. Tax periods before that date stay under the repealed laws, including the old VAT Act.
Under the new laws, a small business in Nigeria is exempt from registering for VAT, charging VAT and filing VAT returns. It may opt in if it wants to. The old N25 million VAT threshold that many businesses still quote is obsolete.
For a business that is registered, the VAT rate is 7.5%, unchanged by the new Act, and a VAT return, including a nil return, is due on or before the 21st of the following month. The NRS sets out who must register for and charge VAT, the small-company exemption and what a VAT invoice must show on its Value Added Tax page.
Why would a small business opt in? Usually because of who its customers are, or because it pays a lot of VAT on its own purchases. That is a decision to take with your tax adviser, looking at your own figures, not one to copy from a competitor.
Why the turnover limit is contested
The exemption depends on being a small business, and the turnover limit for that is not settled. Two official texts of Nigeria's 2025 tax Acts exist: the version gazetted by the FIRS, now the NRS, and the National Assembly's copy of January 2026. Some figures differ between them. For the small-business limit, the gazetted text says N50 million and the National Assembly's copy says N100 million. The NRS says it applies the gazetted laws, and re-gazetting has been ordered.
In practice:
| Your annual turnover | Position at the time of writing |
|---|---|
| Below N50 million | Small under both texts on turnover |
| Between N50 million and N100 million | Small under one text, not the other: take advice |
| Above N100 million | Not small under either text |
Turnover may not be the only condition, so check every condition with your adviser before you rely on the exemption, and keep a note of the advice with your records.
Achekam does not settle the question for you either. It does not use the contested small-company turnover figure until one Achekam platform administrator chooses a candidate with a reason and a different administrator approves it. Until then, the size class shows as undetermined, together with what each candidate figure would give.
Achekam does not check your VAT registration
Achekam does not check whether your business is VAT-registered before it charges VAT on your documents. That decision is yours. If you are exempt and have not opted in, make sure your invoices carry no VAT.
Tax codes on each invoice line
Once the Nigeria pack is activated under Settings, Jurisdiction & regulators, a Nigerian business picks a tax code on each invoice line: standard, zero-rated, exempt, out of scope or reverse charge. Only standard lines carry VAT, at the approved rate for Nigeria.
There is a further step before standard-rated VAT can be charged at all. While the Nigerian VAT rate rule is awaiting approval on the platform, Achekam refuses to charge standard-rate VAT on a Nigerian workspace's invoice and tells the user to choose a tax code without VAT or wait.
For a small business that has not opted in, that refusal rarely matters, because it should not be charging VAT anyway. Agree with your adviser which code without VAT describes your sales correctly, and use it consistently. The customer's total is the same either way; your records are not.
Tax Invoice only when a VAT number is set
You enter your VAT registration number in Settings under Firm Profile. Documents made by Achekam's server print it, and they are titled Tax Invoice only when a VAT number is set. A small business that is not registered leaves the field empty, and its server-made documents are not titled Tax Invoice.
One exception needs care. The invoice PDF downloaded or e-mailed from the invoice screen is always headed TAX INVOICE and cites the South African VAT Act, whatever your country or VAT number. A Nigerian business that is not registered for VAT should not send that PDF as if it were a tax invoice. Explain the limit to customers who ask, and keep your own records straight.
A short checklist
- Work out your turnover for the last year and check it against both figures.
- Take advice on every condition for the exemption and keep it on file.
- Decide whether to opt in, and record why.
- Leave the VAT number empty in Firm Profile unless you are registered.
- Use one agreed tax code without VAT on every line if you are exempt.
For businesses that are registered, charging VAT in Nigeria and Kenya while rates await approval explains the refusal in more detail.
Start with last year's turnover figure. Everything else in this article depends on which side of the two limits it falls.
General guidance only, not advice on your own circumstances. Tax and payroll rules change: check the current position with the authority or your adviser.
