Output VAT
Output VAT is the VAT a registered business charges its customers on taxable sales, at 7.5% in Nigeria. It is collected on behalf of FIRS, offset against input VAT paid on purchases, and the net amount is remitted monthly.
Worked example
You invoice ₦1,000,000 for taxable services and add 7.5% output VAT of ₦75,000. The client pays ₦1,075,000. The ₦75,000 was never your revenue: you are holding it for FIRS.
The cash-flow trap
Because output VAT arrives in your bank account alongside your fee, it is easy to spend it. Businesses that treat collected VAT as income find themselves short at filing time. Separating it, or tracking it in your books as a liability from the moment the invoice is paid, avoids the problem.
Returns and payment are due by the 21st of the following month.
More Nigerian tax terms
- Company Income Tax (CIT)
- Consolidated Relief Allowance (CRA)
- Development Levy
- Direct assessment
- FIRS (Federal Inland Revenue Service)
- Input VAT
- Minimum wage tax exemption
- PAYE (Pay-As-You-Earn)
- Personal Income Tax (PIT)
- Rent relief
- Tax Clearance Certificate (TCC)
- Tax Identification Number (TIN)
- Value Added Tax (VAT)
- Withholding Tax (WHT)
Tax that works itself out
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