VAT Management

Manage your Value Added Tax (VAT) obligations in compliance with Nigerian tax regulations. Access VAT management at https://accounting.digit-tally.io/vat.

[SCREENSHOT: VAT management interface at accounting.digit-tally.io/vat]

What is VAT?

Value Added Tax (VAT) is a consumption tax levied on the supply of goods and services in Nigeria. The current standard rate is 7.5%.

Key Benefits

• Automated VAT Tracking - Track VAT on sales and purchases
• Compliance - Stay compliant with FIRS VAT regulations
• Return Preparation - Generate VAT returns for filing
• Input Tax Credit - Track and claim input VAT

Understanding Nigerian VAT

VAT Rates

Category	Rate	Examples
Standard Rate	7.5%	Most goods and services
Zero-Rated	0%	Exports, basic food items, medical supplies
Exempt	N/A	Financial services, education, rent

VAT-Inclusive vs VAT-Exclusive Pricing

VAT-Inclusive (Gross Amount):

• Price includes VAT
• Common in retail (B2C)
• VAT = Price × 7.5/107.5

VAT-Exclusive (Net Amount):

• VAT added to price
• Common in B2B transactions
• VAT = Price × 7.5%

How VAT Works in Digit Tally

Output VAT (Sales)

When you create invoices in the Sales app, VAT is automatically:

• Calculated at 7.5%
• Added to invoice totals
• Tracked as VAT liability

[SCREENSHOT: Invoice showing VAT calculation]

Input VAT (Purchases)

When you record purchase invoices in the Suppliers app, VAT is:

• Extracted from supplier bills
• Tracked as VAT credit
• Available for offset against output VAT

[SCREENSHOT: Purchase invoice with input VAT]

Net VAT Payable

Formula:

Net VAT Payable = Output VAT (Sales) - Input VAT (Purchases)

If the result is:

• Positive - You owe VAT to FIRS
• Negative - You have VAT credit (refund or carry forward)

Viewing VAT Summary

Step 1: Access VAT Management

1. Log in to your Digit Tally account
2. Navigate to the Accounting app
3. Go to https://accounting.digit-tally.io/vat

[SCREENSHOT: VAT management dashboard]

Step 2: Review VAT Summary

The VAT dashboard shows:

Section	What It Shows
Output VAT	VAT collected from customers (sales)
Input VAT	VAT paid to suppliers (purchases)
Net VAT	Amount payable to or refundable by FIRS
Current Period	Month/quarter summary
Year-to-Date	Cumulative VAT for the year

[SCREENSHOT: VAT summary showing output, input, and net VAT]

Step 3: Filter by Period

You can view VAT for:

• Current Month - Default view
• Current Quarter - Q1, Q2, Q3, Q4
• Custom Date Range - Any period
• Year-to-Date - Full year summary

[SCREENSHOT: Date filter options for VAT reports]

Preparing VAT Returns

Monthly VAT Returns

Nigerian businesses must file VAT returns monthly by the 21st day of the following month.

Steps:

1. Go to VAT Management
2. Select the month for filing
3. Review output and input VAT
4. Generate VAT return report
5. File with FIRS

[SCREENSHOT: Monthly VAT return preparation screen]

VAT Return Components

Your VAT return should include:

1. Total Sales (VAT-Inclusive) - All sales for the period
2. Output VAT - VAT charged on sales (7.5%)
3. Total Purchases (VAT-Inclusive) - All purchases for the period
4. Input VAT - VAT paid on purchases (claimable)
5. Net VAT - Output VAT minus Input VAT
6. VAT Payment - Amount to remit to FIRS

Exporting VAT Returns

Export VAT data in formats accepted by FIRS:

• PDF - For printing and records
• Excel - For manipulation and analysis
• CSV - For import into FIRS portal

[SCREENSHOT: VAT return export options]

VAT Compliance Requirements

Registration Threshold

Your business must register for VAT if:

• Annual turnover exceeds NGN 25 million
• You voluntarily register (even below threshold)

Filing Requirements

Requirement	Deadline	Details
Monthly Returns	21st of following month	Even if nil return
VAT Payment	21st of following month	Pay net VAT due
Annual Returns	January 31st	Summary of all monthly returns

Record Keeping

FIRS requires you to keep:

• All sales invoices
• All purchase invoices
• VAT returns filed
• Payment receipts
• Records for at least 6 years

Compliance Tip

Always file your VAT returns on time, even if you have zero sales or purchases. Late filing attracts penalties.

Common VAT Scenarios

Scenario 1: Positive Net VAT (You Owe Tax)

Example:

• Output VAT (Sales): NGN 750,000
• Input VAT (Purchases): NGN 300,000
• Net VAT Payable: NGN 450,000

Action: Pay NGN 450,000 to FIRS by the 21st of the following month.

[SCREENSHOT: Positive net VAT scenario]

Scenario 2: Negative Net VAT (VAT Credit)

Example:

• Output VAT (Sales): NGN 200,000
• Input VAT (Purchases): NGN 500,000
• VAT Credit: (NGN 300,000)

Action: Carry forward credit to next month or apply for refund from FIRS.

[SCREENSHOT: Negative net VAT scenario showing credit]

Scenario 3: Zero-Rated Sales

Example:

• You export goods worth NGN 10,000,000
• VAT rate: 0% (export is zero-rated)
• Output VAT: NGN 0
• Input VAT (on purchases): NGN 500,000
• VAT Credit: (NGN 500,000)

Action: Claim input VAT refund from FIRS with export documentation.

Scenario 4: Mixed Sales (Standard + Exempt)

Example:

• Standard-rated sales: NGN 5,000,000 (VAT: NGN 375,000)
• Exempt sales: NGN 2,000,000 (VAT: NGN 0)
• Total Output VAT: NGN 375,000

Note: You can only claim input VAT related to standard-rated sales.

VAT on Specific Transactions

Services

Most services are subject to 7.5% VAT:

• Professional services (accounting, legal, consulting)
• IT services
• Transportation services
• Hotel and hospitality services

Exceptions: Financial services, education, healthcare.

Goods

Standard rate (7.5%) applies to most goods:

• Manufactured products
• Imported goods
• Wholesale and retail

Zero-Rated: Exports, basic food items (bread, cereals, fish, meat), books, newspapers, medical supplies.

Exempt: Completely exempt from VAT (plant and machinery for use in export processing zones, tractors, etc.).

Imports

VAT on imports is charged at the point of entry:

• Rate: 7.5% of (CIF value + import duty)
• Payment: To Nigeria Customs Service
• Treatment: Can be claimed as input VAT

Tracking VAT Transactions

From Sales App

All invoices created in the Sales app automatically:

1. Calculate VAT at 7.5%
2. Add to output VAT total
3. Show in VAT management dashboard

Learn more: Create Invoices

From Suppliers App

All purchase invoices recorded automatically:

1. Extract VAT amount
2. Add to input VAT total
3. Show in VAT management dashboard

Learn more: Purchase Invoices

Manual VAT Adjustments

If you need to adjust VAT manually, contact your accountant or Digit Tally support for guidance on recording VAT adjustments.

VAT Reports

Available Reports

Report	Purpose
VAT Summary	Overview of output, input, and net VAT
Output VAT Report	Detailed list of all sales VAT
Input VAT Report	Detailed list of all purchase VAT
VAT Reconciliation	Match VAT to transactions
Period Comparison	Compare VAT across periods

[SCREENSHOT: VAT reports menu]

Generating VAT Reports

1. Go to VAT Management
2. Select Reports
3. Choose report type
4. Select date range
5. Click Generate
6. Export or print

[SCREENSHOT: Generated VAT report with data]

VAT Penalties and Interest

Late Filing Penalties

FIRS imposes penalties for late filing:

• First month: NGN 50,000
• Subsequent months: NGN 25,000 per month
• Maximum: NGN 200,000

Late Payment Interest

Interest accrues on unpaid VAT:

• Rate: 10% per annum
• Calculation: Daily from due date

Non-Registration Penalty

Failing to register when required:

• Penalty: NGN 50,000
• Additional: 5% of all transactions while unregistered

Avoid Penalties

Always file and pay VAT on time. Set reminders for the 21st of each month.

Troubleshooting VAT Issues

Issue: Output VAT Doesn't Match Sales

Check:

• Are all invoices recorded in the Sales app?
• Are any invoices exempt or zero-rated?
• Are there any manual adjustments?

Issue: Input VAT Not Showing

Check:

• Are purchase invoices recorded correctly?
• Is VAT amount clearly indicated on supplier invoice?
• Are purchases VAT-eligible (not exempt)?

Issue: VAT Return Doesn't Balance

Solution:

1. Run VAT reconciliation report
2. Check for manual journal entries affecting VAT
3. Verify all transactions are in correct period
4. Contact support if discrepancy persists

Frequently Asked Questions

Do I need to charge VAT on all sales?

No. Only charge VAT on standard-rated (7.5%) goods and services. Exempt and zero-rated items don't attract VAT.

Can I claim VAT on all purchases?

You can only claim input VAT on purchases used for making taxable supplies. VAT on purchases for exempt supplies is not claimable.

What if I have more input VAT than output VAT?

You can carry forward the credit to the next month or apply for a refund from FIRS (subject to verification).

How do I handle VAT on partial payments?

VAT is due when you issue an invoice, not when payment is received. Account for VAT on the full invoice amount.

Do I file VAT if I had no sales?

Yes. File a nil return even if you had no transactions during the month.

Related Topics

• PAYE Management - Manage employee income tax
• Withholding Tax - Track WHT obligations
• Create Invoices - How VAT is charged on sales
• Purchase Invoices - Recording input VAT

Need Help?

Support

For VAT-related questions:

• Email: support@digit-tally.io
• Consult with your tax advisor for specific situations
• Refer to FIRS VAT guidelines for latest regulations
• FIRS Contact Centre: taxinfo@firs.gov.ng

What's Next?

• Withholding Tax - Learn about WHT compliance
• Company Income Tax - Manage corporate tax
• Financial Reports - View all accounting reports