VAT on services bought from abroad
When a Nigerian business must withhold and remit VAT itself on software, subscriptions and services bought from foreign suppliers, and how to book it.
By Achekam · · 5 min read · For Running a business businesses in Nigeria
Look at a Nigerian company's card statement and you will usually find a row of foreign charges: a design tool, cloud hosting, an accounting add-on, a marketing platform, a consultant abroad paid by transfer. Most of these invoices arrive with no Nigerian VAT on them. It is tempting to treat that as the end of the matter.
It is not. Nigerian VAT is charged on supplies made to people in Nigeria, and when the supplier is outside the country, the law often moves the job of accounting for that VAT onto the Nigerian customer. This article explains when that happens, what changes when the NRS has appointed the foreign supplier to collect, and how to record the VAT in your books.
The Nigerian customer withholds and remits
The NRS says that where a non-resident supplies taxable goods or services from outside Nigeria to a person in Nigeria, the Nigerian recipient must withhold the VAT due on the supply and remit it to the NRS. The Nigeria Tax Act, 2025 says the same in section 151(2): the taxable person receiving the supply must withhold the VAT and pay it to the Service.
The Act also lets the NRS direct a person invoiced without VAT to self-account for it and remit it, under section 155(2). Either way, the practical position is the same. If a foreign supplier bills you for a taxable service and no Nigerian VAT has been collected, the VAT is yours to calculate and pay. Under the Act, VAT is charged at 7.5% on the value of taxable supplies, subject to the exempt and 0% items it lists.
On timing, the NRS says a taxable person must file returns and remit VAT withheld within 14 days of the month following the month of the transaction, a different date from the 21st that applies to its own VAT return. Section 155 of the Act requires remittances under that section to carry a schedule showing the supplier's name, Tax ID and address, the invoice number, the gross amount, the VAT and the month. The NRS provides a withholding VAT return template that is completed and uploaded on Rev360.
Foreign suppliers the NRS has appointed
Some foreign suppliers register in Nigeria and charge VAT themselves. The NRS says a non-resident supplying taxable goods or services to Nigerian customers must register for tax and include VAT on its invoice, and that non-resident suppliers of digital or physical goods and services are among the businesses that must register.
Where the NRS has appointed a foreign supplier to collect, the picture changes. The Act says the recipient does not withhold where the Service has appointed the supplier to collect the VAT and it has done so. The NRS's Guidelines on the Withholding of VAT spell out the layers: an appointed non-resident supplier is primarily responsible for collecting and remitting the VAT, and where the non-resident supplier is not appointed, the Nigerian recipient must withhold.
If the appointed supplier does not collect
Appointment does not end the question. The same guidelines say that if an appointed non-resident supplier fails to collect the VAT on a supply to an appointed agent in Nigeria, the Nigerian appointed agent must withhold it. And the Act's exemption for recipients only applies where the appointed supplier has actually collected.
So check the invoice itself, not the supplier's reputation. An invoice from an appointed supplier that shows Nigerian VAT charged is the evidence you need. An invoice from the same supplier that shows none puts you back into the withholding position. Keep both kinds of invoice on file.
Booking self-accounted VAT in Achekam
Achekam records supplier bills line by line with VAT. A bill without a purchase order waits for approval before it posts, and it can be paid in full or in parts from the bank account you choose. One limit matters here: supplier bills and purchase orders do not yet use a Nigerian business's own VAT rate. They offer 15% or 0%, and default to 15%.
For a foreign service invoice that carries no Nigerian VAT, that means:
- Record the bill for the amount the supplier charged, with the line set to 0%, so the default 15% is not added.
- Post a manual journal for the VAT you are accounting for: the input VAT you are entitled to claim on one side, and the amount owed to the NRS on the other. Agree the accounts with your accountant.
- When you remit, post the payment against the NRS liability.
Achekam refuses an unbalanced journal or one dated in a closed month, and a posted journal is corrected only by a reversal, so the record of what you self-accounted stays intact.
Getting the VAT back as input tax
Paying the VAT is not always a cost. Under section 156(5) of the Act, input tax is deductible only so far as it was incurred for making taxable supplies, and only the taxable proportion where supplies are mixed, within five years after the end of the tax period in which it was incurred. A business whose sales are taxable can ordinarily claim the VAT it withheld on a foreign service it uses for those sales. One making only exempt supplies cannot. For the rules on claiming, see claiming input VAT in Nigeria.
A monthly check on overseas charges
- List every foreign charge in the month from card and bank statements.
- Mark which suppliers showed Nigerian VAT on the invoice and which did not.
- Work out the VAT on each one without it.
- Complete the withholding VAT template and remit within 14 days of the month following the transaction.
- Post the journal in Achekam and keep the invoice, the schedule and the payment evidence together.
Tools and hosting are the charges most often missed; overseas tool and hosting charges looks at them for software businesses, and when withholding is the final tax on payments abroad covers the income tax side of paying a foreign supplier. Start with last month's statement, and the routine will set itself.
General guidance only, not advice on your own circumstances. Tax and payroll rules change: check the current position with the authority or your adviser.
