Do you have to charge VAT yet?
VAT obligation
—
Exemption threshold
—
Estimated annual output VAT
—
The turnover line that decides everything
Whether your business has to charge VAT comes down to one number: annual turnover. The tax reform now phasing in lifted small businesses out of the VAT net using a turnover test, and this calculator applies that threshold at NGN 100 million a year. Sit at or below it and you are not obliged to charge or collect VAT on your sales. Cross it and you step into the standard regime, charging 7.5 percent on your taxable supplies and remitting it. The tool simply compares your figure to that line and tells you which side you are on, then shows what the obligation would look like once you are over it.
Two practical notes. First, the test is about turnover, your total sales, not profit. A trading business can be on thin margins and still blow past NGN 100 million in revenue. Second, this is the threshold the calculator applies under the reform, and the reform is exactly the area where figures are being revised. Treat NGN 100 million as the modelled line and confirm the current threshold with the Federal Inland Revenue Service, which under the 2025 legislation is being reconstituted as the Nigeria Revenue Service.
What "must charge VAT" actually costs you
The calculator opens at NGN 80 million of turnover, which sits below the line, so it returns no obligation to charge. To see the other side, push the turnover to NGN 150 million. Now the status flips to "must charge VAT," and the estimated annual output VAT, applying the 7.5 percent rate to all that turnover, comes to NGN 11,250,000.
| Input | Value |
|---|
Output VAT is not the cheque you write
Read that NGN 11,250,000 carefully, because the tool deliberately keeps it simple and you should not. It assumes every naira of turnover is a taxable supply at the standard rate, which is rarely the whole picture. Some of your sales may be zero-rated or exempt, and they carry no output VAT. More importantly, VAT works on a net basis. You charge output VAT on sales, you pay input VAT on your own purchases and, under the reform, on services and qualifying fixed assets too, and you remit only the difference to the Federal Inland Revenue Service. So the actual cheque is output VAT minus recoverable input VAT, which is usually a good deal less than the gross output figure shown here. Use the estimate to gauge the scale of your VAT cash flow, not as the exact liability.
Registering before you are forced to
A subtle point that trips up growing businesses: not charging VAT and not registering are different things. Even where your turnover keeps you below the threshold so collection is not required, registering with the Federal Inland Revenue Service is generally still expected, and it gives you a VAT identity for dealing with larger customers who want a tax invoice. The common mistake is to ignore VAT entirely until turnover crosses the line, then scramble to register mid-year while sales are already happening. If you can see NGN 100 million coming, get your registration, invoicing, and input-VAT records in order ahead of time rather than after.
Do I look at last year's turnover or this year's?
Practically, you watch a rolling view. If your trailing twelve months are already over NGN 100 million, you are in the regime. If a strong run of months makes it clear you will cross the line this year, do not wait for the year to close. The calculator takes a single annual turnover figure, so feed it your best current twelve-month estimate, and confirm the exact basis of assessment with the Federal Inland Revenue Service.
If I am exempt from charging, can I still reclaim input VAT?
Generally no. The flip side of not charging output VAT is that you usually cannot recover the input VAT on your purchases either, so it becomes a cost you absorb. That is one reason a business close to the threshold sometimes prefers to register. Weigh the input VAT you would recover against the compliance work, and take advice from the Federal Inland Revenue Service or a tax adviser on your specific position.