FG Clarifies 7.5% VAT on Banks & Fintech Digital Transaction Fees – What It Means for Nigerians

FG Clarifies 7.5% VAT on Bank & Fintech Digital Transactions — What Nigerians Must Know

Nigeria’s Federal Government has reaffirmed that banks, microfinance institutions, and fintech platforms must collect and remit 7.5 per cent Value Added Tax (VAT) on selected electronic banking service fees — a directive that took effect from January 19, 2026 and is now fully being implemented across the financial sector.

Under the new enforcement, service charges on digital transactions such as mobile transfers, USSD banking, POS fees and card issuance will attract VAT, but the tax is not applied to the principal amount being transferred.

What Services Attract VAT

According to notices issued by major fintech firms and banks under the guidance of the Nigeria Tax Act and Nigerian Revenue Service (NRS):

• Mobile money and transfer service fees
• USSD transaction fees
• Fees for card issuance and maintenance
• POS service charges

The VAT is calculated only on the service fee, not the transaction value. For example, if a bank charges ₦100 for a transfer service, VAT of ₦7.50 applies only to that fee.

Tax authorities have emphasized that this is not a new tax on customers’ funds, but rather the enforcement of existing VAT rules requiring banks and fintech’s to act as collection agents for the government. VAT has long applied to service charges under Nigeria’s existing tax law, but compliance has now been standardized across all digital financial service providers.

Why This Matters to Consumers

Millions of Nigerians who rely on digital banking, USSD transfers, and fintech wallets have begun to notice the additional VAT on service fees — an extra cost that, while small per transaction, compounds for frequent users. Users on social media and community forums have shared explanations of how the VAT works, highlighting that it does not reduce the amount sent but adds to the cost of service fees charged by banks or apps.

For example, a ₦50 service charge on a USSD transfer now attracts ₦3.75 VAT, bringing total cost to ₦53.75, without altering the principal transferred amount.

Industry and Public Response

Consumers and industry stakeholders have reacted with mixed views. Some Nigerians have expressed frustration over higher cumulative costs on daily digital transactions, while others note that the move simply aligns fintech’s with longstanding tax laws that traditional banks have been applying — albeit with less transparency.

Agent associations have also criticized the approach, with some groups arguing that frequent transaction fees with VAT could add pressure on low-income users and informally employed Nigerians who depend heavily on mobile and USSD banking.

Government Rationale

The NRS and Federal Government maintain that clearer VAT collection on service fees fosters transparency and ensures fairness across traditional banks and digital financial service providers. The policy is part of broader efforts to strengthen tax compliance, boost non-oil revenue and harmonies tax practices in Nigeria’s rapidly digitalizing financial sector.

What Remains Exempt

• Interest earned on savings and deposits
• Loan interest and charges unrelated to service fees
• Principal transfer amounts

Consumers are advised to review transaction receipts, which should now itemize VAT explicitly, and to contact their banks or fintech providers for clarity on specific fee structure

FAQ (Optional Add-on for SEO)

Why are banks and fintech’s charging 7.5% VAT?
The VAT is a statutory tax on service charges required to be collected and remitted by banks and fintech’s under Nigeria’s existing VAT rules.

Does 7.5% VAT apply to the money I send?
No. VAT is applied only to the service fee, not to the principal transfer amount.

Which transactions are exempt?
Interest on savings, loan interest, and principal amounts transferred remain exempt.