FG Directs Banks, Fintechs to Charge 7.5% VAT on Electronic and USSD Banking Services
Nigeria’s Federal Government has directed banks, fintech companies, and other financial service providers to begin charging a 7.5 per cent Value Added Tax (VAT) on eligible electronic banking and USSD service fees, as part of efforts to strengthen tax compliance in the digital economy.
The directive applies to service charges on electronic transactions—including mobile transfers, USSD banking, card-related fees, and other digital financial services—but does not apply to the actual funds being transferred, according to industry guidance.
What the VAT Applies To
Under Nigeria’s VAT framework, the 7.5 per cent tax is charged strictly on fees and commissions, not on customers’ principal balances.
Services affected include:
- Electronic transfer charges
- USSD transaction fees
- Card issuance and maintenance fees
- Wallet and payment service charges
For example, if a customer is charged ₦50 as a transfer fee, the VAT applied would be ₦3.75, bringing the total service cost to ₦53.75.
Why the Government Is Enforcing the VAT
Tax authorities say the move is not the introduction of a new tax, but rather a reinforcement of existing VAT obligations under Nigerian law. As digital banking and fintech adoption expand rapidly, regulators are seeking to close compliance gaps and ensure proper remittance of taxes on digital services.
The enforcement also aligns with broader fiscal reforms aimed at boosting non-oil revenue and improving transparency in Nigeria’s growing fintech and payments ecosystem.
Impact on Banks, Fintechs, and POS Operators
Banks and fintech firms are required to:
- Clearly itemise VAT on transaction receipts
- Collect VAT on eligible service fees
- Remit the tax to the Federal Inland Revenue Service (FIRS)
POS operators are similarly affected, with VAT applying only to the agent’s service charge, not the cash withdrawn by customers.
Public Reaction
The directive has sparked debate among consumers and industry operators, particularly over the impact on small, frequent transactions. Some users have raised concerns about rising digital banking costs, while industry analysts note that VAT enforcement could encourage greater pricing transparency across financial platforms.
What Customers Should Know
- VAT is 7.5% of the service fee, not the transaction amount
- The charge is statutory and not discretionary
- Savings interest and loan interest remain VAT-exempt
As compliance takes effect across platforms, customers are expected to see clearer VAT breakdowns on transaction notifications and account statements.
