VAT Registration Threshold in Nigeria: The ₦25 Million Rule Explained

Value Added Tax (VAT) is one of the most important indirect taxes for Nigerian businesses. Understanding whether your business needs to register for VAT is crucial for compliance and avoiding penalties. This comprehensive guide explains everything you need to know about Nigeria's VAT registration threshold.

What is the VAT Registration Threshold in Nigeria?

The VAT registration threshold in Nigeria is ₦25 million in annual turnover. This means that any business whose taxable supplies exceed ₦25 million within a 12-month period is required to register for VAT with the Nigeria Revenue Service (NRS), formerly known as FIRS.

This threshold was established under the VAT Act and has been maintained through subsequent Finance Acts. It's important to note that this threshold applies to taxable supplies only—exempt supplies are not counted toward this limit.

Who Must Register for VAT?

Mandatory Registration

You must register for VAT if:

1. Your taxable turnover exceeds ₦25 million in any 12-month period
2. You expect your turnover to exceed ₦25 million in the next 30 days
3. You import goods or services into Nigeria (regardless of turnover)
4. You are a government contractor receiving payments subject to VAT

Voluntary Registration

Even if your turnover is below ₦25 million, you can voluntarily register for VAT. This might be beneficial if:

• Your customers require VAT invoices
• You want to claim input VAT on your purchases
• You're planning business expansion
• You supply to government agencies

Exemptions from VAT Registration

Certain businesses and supplies are exempt from VAT entirely:

Category	Examples
Medical Services	Hospitals, clinics, medical practitioners
Educational Services	Schools, universities, educational materials
Basic Food Items	Unprocessed agricultural products
Baby Products	Baby food, diapers, certain baby items
Export of Goods	Goods exported outside Nigeria (zero-rated)

How to Calculate Your Taxable Turnover

Your taxable turnover includes:

• Standard-rated supplies (7.5% VAT)
• Zero-rated supplies (0% VAT but still taxable)

Your taxable turnover excludes:

• Exempt supplies
• VAT charged on your sales
• Capital assets sold (unless you're in the business of selling assets)

Example Calculation

A retail business has the following annual revenue:

Revenue Type	Amount	Included in Threshold?
Product sales	₦20,000,000	Yes
Medical supplies (exempt)	₦3,000,000	No
Export sales (zero-rated)	₦8,000,000	Yes
Total taxable turnover	₦28,000,000	—

In this example, the business exceeds the ₦25 million threshold and must register for VAT.

When Must You Register?

Once your taxable turnover exceeds ₦25 million, you must:

1. Register within 6 months of exceeding the threshold
2. Begin charging VAT from your effective registration date
3. File monthly VAT returns by the 21st of each month

Failing to register on time can result in penalties including:

• ₦10,000 for the first month of default
• ₦5,000 for each subsequent month
• Back-dated VAT assessments
• Interest on unpaid VAT

Step-by-Step VAT Registration Process

Step 1: Gather Required Documents

• Certificate of Incorporation (CAC)
• Tax Identification Number (TIN)
• Memorandum and Articles of Association
• Proof of business address
• Valid ID of directors
• Bank statements (optional but helpful)

Step 2: Apply Online via NRS Portal

1. Visit the NRS (Formerly FIRS) TaxPro Max portal
2. Create an account or log in
3. Navigate to VAT Registration
4. Complete the application form
5. Upload required documents
6. Submit application

Step 3: Receive Your VAT Certificate

After successful registration, you'll receive:

• VAT Registration Certificate
• VAT Identification Number (VATIN)
• Effective date of registration

Common Mistakes to Avoid

1. Ignoring the Threshold

Many businesses fail to monitor their turnover and miss the registration deadline. This can lead to backdated VAT assessments.

2. Including Exempt Supplies

Don't count exempt supplies toward your threshold—this could lead to unnecessary early registration.

3. Forgetting About Expected Turnover

If you sign a contract that will push you over the threshold in the next 30 days, you must register immediately.

4. Not Keeping Proper Records

Without accurate records, you cannot determine when you exceeded the threshold or calculate your VAT correctly.

How Finora Helps with VAT Compliance

Finora automates your entire VAT compliance process:

Automatic Threshold Monitoring

Finora tracks your taxable turnover in real-time and alerts you when you're approaching the ₦25 million threshold. No more manual calculations or surprise registration requirements.

One-Click VAT Returns

Once registered, generate NRS-compliant VAT returns with a single click. Finora automatically:

• Calculates output VAT on your sales
• Tracks input VAT on your purchases
• Generates the monthly VAT return form
• Provides filing reminders

Accurate Record Keeping

Every transaction is properly categorized as taxable, exempt, or zero-rated. This ensures accurate threshold calculations and simplified audits.

Integration with Your Accounting

Your VAT calculations flow directly into your general ledger, financial statements, and tax reports—no duplicate entry required.

Frequently Asked Questions

What happens if I don't register when required?

Failure to register attracts penalties starting at ₦10,000 for the first month, plus ₦5,000 for each subsequent month. NRS (Formerly FIRS) can also assess backdated VAT on all taxable supplies made since you should have registered.

Can I deregister if my turnover falls below ₦25 million?

Yes, you can apply for deregistration if your taxable turnover has been below ₦25 million for 12 consecutive months. However, you must settle all outstanding VAT obligations first.

Do I need to register for VAT if I only export goods?

Export of goods is zero-rated, meaning it counts toward your taxable turnover threshold. If your total taxable turnover (including zero-rated exports) exceeds ₦25 million, you must register.

What if I provide both taxable and exempt supplies?

You should track these separately. Only taxable supplies count toward the ₦25 million threshold. However, once registered, you may face restrictions on claiming input VAT related to exempt supplies.

Is there a different threshold for foreign companies?

No. Foreign companies operating in Nigeria are subject to the same ₦25 million threshold. However, if you're providing digital services to Nigerian consumers, different rules may apply under the digital services tax framework.

Conclusion

Understanding and complying with Nigeria's VAT registration threshold is essential for every business. The ₦25 million threshold determines when you must register, but proper planning and record-keeping ensure you never miss this important milestone.

With Finora, you can automate the entire process—from monitoring your threshold to filing your returns. Our platform handles the complexity of Nigerian tax compliance so you can focus on growing your business.

---

Ready to simplify your VAT compliance?

Get started for free and see how Finora automatically tracks your taxable turnover, alerts you to registration requirements, and generates NRS-compliant VAT returns.

Try Finora Free →