7.5% VAT on Bank Transfers Explained: What Nigerians Are Really Paying

There has been widespread confusion and concern among Nigerians following reports that a 7.5% Value Added Tax (VAT) will apply to mobile transfers and USSD transactions starting January 19, 2026.

Many people mistakenly believe this means 7.5% of the money being transferred will be deducted as tax. This assumption has caused unnecessary panic and it is incorrect.

This article provides a clear and important clarification on what the new VAT directive really means.

The Truth: You Are NOT Paying VAT on the Money You Transfer

The 7.5% VAT does NOT apply to your transfer amount.

Instead, the VAT is charged only on the transaction fee imposed by banks or telecom service providers for electronic banking services.

This clarification was communicated to customers by financial institutions, including Moniepoint, and aligns with existing VAT laws on digital services in Nigeria.

Simple Example to Break It Down

Scenario:

• You transfer ₦10,000
• Your bank charges a ₦50 transfer fee
• VAT is 7.5% of ₦50

Calculation:

• VAT = 7.5% × ₦50 = ₦3.75
• Total charge = ₦50 + ₦3.75 = ₦53.75

You are not paying ₦750 VAT.
You are paying ₦3.75 VAT on the service fee, not the transfer amount.

Which Transactions Are Affected by the 7.5% VAT?The VAT applies to digital service charges, including:

•  USSD transfer fees
• Mobile banking app transfer fees
• SMS alerts
•  Certain electronic banking service charges

Which Transactions Are NOT Affected?
The following are not taxed under this VAT clarification:

• The actual amount you transfer
• Cash deposits
• Cash withdrawals
• Funds received into your account

Why This Clarification Matters
Misunderstanding tax policies can lead to fear, misinformation, and loss of trust in the banking system. This clarification ensures Nigerians understand that:

• VAT is applied only to service fees
• The impact on customers is minimal
• There is no additional tax burden on transferred funds

The 7.5% VAT on electronic banking services is not new, but its application to certain digital transaction fees has sparked renewed attention. The key takeaway is simple:

You are paying VAT on the bank’s service charge — not on your money.

Staying informed helps you make better financial decisions and avoid unnecessary panic.

For more verified financial insights and policy explanations, stay connected with Knightpen.com.