AI agents for business finance: what they can and can't do
What AI agents can do in bookkeeping, close, collections and compliance today, where a person must stay in charge, and how to judge a product.
The short answer
Output VAT is the 7.5% you charge customers; input VAT is the VAT you pay on purchases for your business. Each month a VAT-registered shop pays the NRS output VAT minus input VAT, and from 1 January 2026 the Nigeria Tax Act 2025 lets it count VAT on services and fixed assets used for taxable sales, not just stock (Forvis Mazars, March 2026). In the example below, ₦375,000 output less ₦270,000 input leaves ₦105,000 to pay.
VAT is a tax on the final consumer, collected in stages. A shop collects it from customers and passes it on, after taking back the VAT it paid to its own suppliers. The netting is simple arithmetic, but what counts as input VAT has changed under the 2025 reforms, and that changes the cheque you write each month.
The two terms
- Output VAT
- VAT you charge on your sales: 7.5% of the price before VAT for standard-rated goods.
- Input VAT
- VAT you pay on purchases used for your taxable sales, shown on a proper VAT invoice from a registered supplier.
- Net VAT
- Output VAT minus input VAT. Positive: you pay it. Negative: a credit you carry forward or claim as a refund.
Mondaq's May 2026 review of the 2025 Act puts it plainly: taxable persons are only obliged to remit the excess where output VAT exceeds input VAT.
What changed in 2026
Under the old VAT Act, Grant Thornton's guide (January 2025) noted there was no provision for input tax claims on services and that VAT on overheads did not qualify. Forvis Mazars reports that under the Nigeria Tax Act 2025, effective 1 January 2026, input VAT on services and fixed assets used for taxable supplies can be claimed, and claims must be made within five years. That widens what a shop can take back: accounting fees, repairs, security, equipment.
Worked example: one month
Example only. Halima runs a VAT-registered home goods shop in Kaduna. In October 2026 her shelf prices include VAT.
Step 1: output VAT
Sales including VAT: ₦5,375,000. VAT inside a VAT-inclusive price is price × 7.5 ÷ 107.5. So ₦5,375,000 × 7.5 ÷ 107.5 = ₦375,000 output VAT, and ₦5,000,000 is her sales before VAT.
Step 2: input VAT
| Purchase | Net | VAT paid | Claimable in 2026? |
|---|---|---|---|
| Stock from a registered wholesaler | ₦3,000,000 | ₦225,000 | Yes |
| Accountant's monthly fee | ₦200,000 | ₦15,000 | Yes (service, from 2026) |
| New chest freezer for the shop | ₦400,000 | ₦30,000 | Yes (fixed asset, from 2026) |
| Total input VAT | ₦270,000 |
Step 3: net VAT
₦375,000 − ₦270,000 = ₦105,000 to pay to the NRS. Under the old rules, only the stock VAT would have counted: ₦375,000 − ₦225,000 = ₦150,000. The 2025 Act saves Halima ₦45,000 this month.
The return is due by 21 November 2026 under section 22(1) of the Nigeria Tax Administration Act 2025; Mondaq's reading is that VAT collected is remitted by the 14th, so she pays by 14 November to be safe. Filing steps are in filing a VAT return on Rev360.
When input exceeds output
In December, Halima stocks up for the festive season: output VAT ₦300,000, input VAT ₦420,000. Net VAT is −₦120,000. She pays nothing and carries the ₦120,000 forward as a credit against January (BusinessDay, February 2026), or applies for a refund; Forvis Mazars reports refunds requested within 12 months are to be processed within 30 days.
Mixed shops: zero-rated and exempt lines
- Zero-rated goods (section 187, for example basic food items): charged at 0%, but the input VAT on them can still be recovered.
- Exempt goods (section 186): no VAT charged, and input VAT on producing them cannot be reclaimed, as Mondaq notes.
- A shop selling both standard-rated and exempt items needs to split its input VAT; take advice on the method.
Common mistakes
- Taking 7.5% of a VAT-inclusive price. On ₦5,375,000 that gives ₦403,125, not ₦375,000. Use 7.5 ÷ 107.5.
- Claiming VAT without an invoice. A cash receipt with no supplier Tax ID or VAT line is weak evidence in an audit.
- Claiming VAT a supplier never charged. If the supplier left VAT off, there is no input VAT to claim, and section 21(p) of the Act may also disallow the expense for income tax.
- Claiming the owner's purchases. A television for the shop counts; one for the owner's sitting room does not.
- Ignoring the credit. A negative month is money owed to you. Carry it forward on the next return rather than losing track of it.
What to check first
- Every purchase you claim has a VAT invoice showing the supplier's Tax ID, invoice number, date, amount and VAT (section 153 of the 2025 Act).
- The purchase is used for your taxable sales, not for the owner's home.
- You are VAT-registered. A small business (turnover ₦100 million or less, fixed assets ₦250 million or less) is exempt from charging and filing VAT, so it has no output VAT to net against.
- You claim within five years.
Where Pryme fits
Pryme invoicing shows VAT on its own line on every sale, and the Finance agent can match supplier bills to payments and list the input VAT for a person to check. Our guide on input VAT under the 2025 Act shows what it tracks.
Questions people ask
What is the difference between input VAT and output VAT?
Output VAT is what you charge customers on sales; input VAT is what you pay suppliers on business purchases. You pay the NRS the difference.
How do I calculate VAT from a VAT-inclusive price?
Multiply the price by 7.5 and divide by 107.5. On ₦107,500, the VAT is ₦7,500.
Can I claim VAT on services in Nigeria now?
Yes, from 1 January 2026, if the services are used for taxable supplies, according to Forvis Mazars' summary of the Nigeria Tax Act 2025.
What if my input VAT is more than my output VAT?
The excess is a credit carried forward to later months, or you can apply for a refund.
Sources
- Forvis Mazars: VAT and Nigeria's 2025 tax reforms, key business changes (16 Mar 2026) · accessed Oct 2026
- Mondaq: Examination of the VAT provisions under the Nigeria Tax Act 2025 (28 May 2026) · accessed Oct 2026
- Grant Thornton: Indirect tax guide, Nigeria (published 1 Jan 2025, pre-2025 Act) · accessed Oct 2026
- Nigeria Tax Administration Act 2025 (gazette copy) · accessed Oct 2026
- BusinessDay: Explainer, VAT: how and when to file yours (4 Feb 2026) · accessed Oct 2026
- Nigeria Tax Act 2025 (assented 26 Jun 2025), sections 8, 20, 21, 55, 56 and 59 · accessed Oct 2026
This article is general information, not financial, legal or tax advice. Products described are provided under the terms on this site and are subject to regulation and eligibility.