E-commerce VAT Rules in Nigeria: A Guide for Online Sellers

E-commerce in Nigeria has exploded, with more businesses selling online than ever before. Whether you sell through your own website, on marketplaces like Jumia or Konga, or via social media, understanding VAT obligations is critical. This guide covers everything e-commerce sellers need to know about VAT compliance in Nigeria.

The Basic Rule: E-commerce is Taxable

Online sales are treated the same as physical sales for VAT purposes. If you sell taxable goods or services online and your turnover exceeds ₦25 million, you must:

1. Register for VAT with NRS (Formerly FIRS)
2. Charge 7.5% VAT on taxable supplies
3. Issue VAT-compliant invoices
4. File monthly VAT returns
5. Remit collected VAT by the 21st

There is no special exemption for e-commerce—the standard VAT rules apply.

VAT Registration for Online Sellers

When to Register

Scenario	Registration Required?
Annual online sales exceed ₦25 million	Yes
Annual online sales below ₦25 million	Optional (voluntary)
Selling on marketplaces only	Depends on your total turnover
Selling digital products/services	Yes, if threshold exceeded

Calculating Your Threshold

Include all taxable sales across all channels:

• Own website sales
• Marketplace sales
• Social media sales
• WhatsApp/direct sales
• Physical store sales (if any)

Example:

Channel	Annual Sales
Own website	₦15,000,000
Instagram sales	₦8,000,000
Jumia marketplace	₦5,000,000
Total taxable turnover	₦28,000,000

This seller exceeds the ₦25 million threshold and must register.

Types of E-commerce Sales

Physical Goods Sold Online

Standard VAT treatment applies:

Product Category	VAT Status
Electronics	Taxable (7.5%)
Fashion/clothing	Taxable (7.5%)
Home goods	Taxable (7.5%)
Beauty products	Taxable (7.5%)
Books (non-educational)	Taxable (7.5%)
Food (processed)	Taxable (7.5%)
Basic food items	Exempt
Baby products (qualifying)	Exempt
Educational materials	Exempt

Digital Products

Digital products sold online are taxable:

• E-books (non-educational)
• Software downloads
• Digital music and videos
• Online courses (non-educational)
• Digital templates and designs
• Subscription services

Note: Educational digital products may be exempt if they qualify under the education exemption.

Online Services

Services provided online are taxable:

• Consulting delivered remotely
• Design services
• Marketing services
• IT support
• Virtual assistance
• Online coaching

Marketplace Seller Obligations

Selling on Jumia, Konga, and Other Marketplaces

When you sell through a marketplace, VAT obligations depend on the arrangement:

Scenario 1: You sell through the marketplace (agent model)

• You remain responsible for VAT
• Marketplace may collect VAT on your behalf
• You must still file returns and reconcile

Scenario 2: Marketplace purchases from you and resells

• You charge VAT to the marketplace
• Marketplace charges VAT to end customer
• You and marketplace both file returns

Key Questions to Ask Your Marketplace

1. Does the marketplace collect VAT on my behalf?
2. Who issues the invoice to the customer?
3. What reports do I receive for VAT reconciliation?
4. How is VAT accounted for in settlements?

Reconciling Marketplace Sales

For each settlement period:

1. Obtain sales report from marketplace
2. Verify VAT charged to customers
3. Reconcile with your own records
4. Include in your monthly VAT return
5. Account for marketplace commissions (input VAT if applicable)

VAT on Shipping and Delivery

Delivery Charges

Delivery charges on domestic shipments are generally:

Scenario	VAT Treatment
Delivery by you (seller)	Part of supply, 7.5% VAT
Separate delivery company	They charge you VAT; you may pass on
Free delivery (absorbed cost)	No separate VAT; part of product price

Example Invoice with Delivery

Product: Wireless Headphones         ₦25,000
Delivery to Lagos                     ₦2,500
-------- Subtotal                             ₦27,500 VAT @ 7.5%                            ₦2,063
-------- Total                                ₦29,563

International Shipping

Goods shipped outside Nigeria (exports) are zero-rated:

• Charge 0% VAT
• Must have export documentation
• Can still claim input VAT

Social Commerce and Informal Selling

Instagram, WhatsApp, and Facebook Sales

Social commerce is booming in Nigeria. VAT rules still apply:

• Track all sales regardless of platform
• Issue invoices for transactions
• Maintain records of all sales
• Include in VAT registration threshold calculation

Challenges and Solutions

Challenge	Solution
Cash/transfer payments	Record all payments; issue receipts
No formal invoicing	Use accounting software or templates
Mixed personal/business	Separate business transactions clearly
Informal record keeping	Implement proper bookkeeping

Minimum Requirements

Even for social sellers:

1. Record every sale with date, customer, product, amount
2. Calculate VAT on taxable sales
3. Issue receipts/invoices (can be digital)
4. Keep payment evidence (bank alerts, etc.)
5. File monthly returns if registered

VAT on Digital Services from Abroad

If you're an e-commerce business receiving services from foreign providers:

Common Services

• Website hosting
• Payment gateway services
• International advertising (Google Ads, Meta Ads)
• Software subscriptions
• Logistics platform fees

Reverse Charge Application

You must self-assess VAT on these imported services:

Example: Google Ads spend $1,000/month

• Exchange rate: ₦1,500/$1
• Naira equivalent: ₦1,500,000
• Reverse charge VAT: ₦112,500

Include in your VAT return as:

• Output VAT: ₦112,500
• Input VAT (if eligible): ₦112,500
• Net effect: ₦0 (if fully recoverable)

E-commerce VAT Invoicing

Invoice Requirements for Online Sales

Every sale must be documented with:

1. Seller details

• Business name
• Address
• VAT registration number

1. Buyer details

• Name (individual or company)
• Delivery address

1. Transaction details

• Order/invoice number
• Date
• Product descriptions
• Quantities and prices

1. VAT details

• Subtotal before VAT
• VAT amount (7.5%)
• Total including VAT

Electronic Invoicing

E-invoices are valid for VAT purposes if they contain all required information. Many e-commerce platforms generate invoices automatically.

Sample E-commerce Invoice

TAX INVOICE
Seller: ABC Online Store VAT Reg: 12345678-0001 15 Admiralty Way, Lekki, Lagos
Order: #20250115-0042 Date: January 15, 2025
Bill To: John Customer Ship To: 45 Broad Street, Lagos
Item                    Qty    Unit Price    Amount <hr /> Bluetooth Speaker        1      ₦35,000      ₦35,000 USB Cable               2       ₦1,500       ₦3,000 Phone Case              1       ₦5,000       ₦5,000 <hr /> Subtotal                                     ₦43,000 Shipping                                      ₦2,500 <hr /> Total before VAT                             ₦45,500 VAT @ 7.5%                                    ₦3,413 <hr /> TOTAL                                        ₦48,913
Payment received via bank transfer Thank you for your order!

Common E-commerce VAT Scenarios

Scenario 1: Dropshipping

You sell products online but suppliers ship directly to customers.

VAT Treatment:

• You charge VAT to your customer
• Supplier charges VAT to you (if Nigerian supplier)
• You file returns based on your sales and purchases

Key Points:

• You're the seller for VAT purposes
• Your profit margin is not the VAT base—total selling price is

Scenario 2: Pre-orders and Deposits

Customers pay deposits for products not yet delivered.

VAT Treatment:

• VAT may be due when deposit is received
• Or when goods are delivered (depending on invoice timing)
• Be consistent in your approach

Recommendation: Invoice and account for VAT when you receive payment or when goods ship—whichever is earlier.

Scenario 3: Returns and Refunds

Customer returns a product for refund.

VAT Treatment:

• Issue a credit note
• Reduce output VAT in the period of return
• Document the return properly

Example Credit Note:

CREDIT NOTE
Original Invoice: #20250110-0035 Credit Note: CN-20250118-001 Reason: Customer return - product damaged
Original item: Bluetooth Speaker    ₦35,000 VAT @ 7.5%                           ₦2,625
-------- Total credit                        ₦37,625

Scenario 4: Discounts and Promotions

Flash sales, coupon codes, and discounts.

VAT Treatment:

• VAT is calculated on the discounted price
• Not on the original price

Example:

• Original price: ₦50,000
• Discount (20%): -₦10,000
• Discounted price: ₦40,000
• VAT (7.5%): ₦3,000
• Total: ₦43,000

Scenario 5: Bundle Sales

Selling products as a bundle with mixed VAT treatment.

VAT Treatment:

• If all items are taxable, apply 7.5% to bundle price
• If mixed (taxable + exempt), apportion based on value
• Document the breakdown

Compliance Challenges for E-commerce

Challenge 1: High Volume, Low Value Transactions

Problem: Hundreds of small orders make record-keeping difficult.

Solution:

• Use e-commerce platforms with built-in invoicing
• Integrate with accounting software
• Automate VAT calculation at checkout

Challenge 2: Multiple Sales Channels

Problem: Sales across website, marketplaces, and social media.

Solution:

• Consolidate all sales data monthly
• Use a central accounting system
• Reconcile each channel separately

Challenge 3: Cash and Informal Payments

Problem: Payments via cash on delivery or informal transfers.

Solution:

• Record all payment methods
• Issue receipts regardless of payment type
• Maintain bank statements showing all receipts

Challenge 4: Customer Doesn't Want Invoice

Problem: Some customers don't request invoices.

Solution:

• You must still record the sale
• VAT is due regardless of whether customer wants invoice
• Keep your own records of every transaction

How Finora Supports E-commerce Businesses

Finora is built for modern Nigerian businesses including e-commerce:

Automatic VAT Calculation

• Set product VAT rates once
• Every invoice calculates VAT automatically
• Handle exempt and taxable products seamlessly

Multi-Channel Tracking

• Record sales from all channels in one place
• Consolidate website, marketplace, and social sales
• Clear reporting by channel

Invoice Generation

• Professional VAT-compliant invoices
• Digital delivery to customers
• Automatic numbering and tracking

Returns and Credit Notes

• Easy credit note generation
• Automatic VAT adjustment
• Linked to original invoice

VAT Return Preparation

• All sales data aggregated automatically
• Input VAT from suppliers tracked
• One-click VAT return generation

Marketplace Reconciliation

• Import marketplace settlement reports
• Reconcile against recorded sales
• Identify discrepancies quickly

Frequently Asked Questions

Do I need to register for VAT if I only sell on Instagram?

If your total annual taxable sales exceed ₦25 million, yes. The platform doesn't matter—the sales threshold does.

Can customers refuse to pay VAT?

No. If you're VAT-registered, you must charge VAT on taxable supplies. The customer pays the VAT-inclusive price. You cannot offer a "no VAT" option.

What if I sell both online and in a physical store?

Combine all sales for threshold calculation and VAT reporting. One registration covers all your business activities.

How do I handle international customers?

Goods shipped outside Nigeria are zero-rated (0% VAT). Maintain export documentation. Services to foreign clients may also be zero-rated or exempt depending on where they're consumed.

Is COD (Cash on Delivery) taxable?

Yes. The payment method doesn't affect VAT. COD sales are taxable just like card or transfer payments.

Conclusion

E-commerce VAT in Nigeria follows the same principles as traditional commerce: taxable goods and services attract 7.5% VAT, and businesses exceeding ₦25 million must register and file monthly returns.

The challenge for online sellers is managing high volumes, multiple channels, and digital transactions. With proper systems and automation, compliance becomes manageable.

Finora helps e-commerce businesses track sales across all channels, calculate VAT automatically, and generate compliant returns—letting you focus on growing your online business.

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