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
No, not if it is a small business with ₦100 million or less in annual turnover. Under the 2025 tax reforms, small businesses are not required to charge VAT or file VAT returns, though they can choose to register by written notice to the tax authority. Businesses above the threshold charge VAT at 7.5% on taxable supplies and file returns.
The rule in plain terms
VAT in Nigeria is charged at 7.5%, a rate the reforms kept. The Nigeria Tax Administration Act 2025 sets out who must register, charge and file VAT, and says that obligation does not apply to a small business. Government guidance summarising the reforms puts it this way: firms with ₦100 million or less in turnover will not be required to charge VAT.
How turnover is measured for VAT
When working out whether you are a small business, some one-off supplies are left out: the sale of a capital asset, and supplies made only because you are selling all or part of the business or permanently closing it. So selling an old delivery van does not push you over the line by itself.
Who needs to charge VAT
| Your situation | Charge VAT? | File VAT returns? |
|---|---|---|
| Turnover ₦100 million or less, not opted in | No | No |
| Turnover ₦100 million or less, opted in by notice | Yes, on taxable supplies | Yes |
| Turnover above ₦100 million | Yes, on taxable supplies | Yes |
| Selling exempt or zero-rated items only | Depends on the item; check the rules for that supply | Check with the tax authority |
Some goods and services are exempt or zero-rated whatever your size. If most of what you sell is basic food, medical or educational items, check how your specific supplies are treated before setting prices.
Why a small business might opt in
The law lets a small business choose to register for VAT by written notice. That is worth thinking about if:
- Your customers are mostly VAT-registered businesses. They can usually claim back VAT you charge, so it does not make you more expensive to them.
- You pay a lot of VAT on your own purchases. Being registered can let you recover input VAT, subject to the rules.
- Large buyers or tenders expect it. Some procurement processes prefer VAT-registered suppliers.
It is usually not worth it if you sell mainly to individuals, who cannot recover VAT, because your prices would rise by 7.5% or your margin would fall.
Worked example
Example: a printing shop near the threshold
Example only. A printing shop company sells ₦90 million a year, mostly to walk-in customers. It is a small business, does not opt in, and charges no VAT. In its third year it wins corporate contracts and turnover heads for ₦130 million. Once it exceeds ₦100 million it must charge 7.5% VAT on taxable supplies. On a ₦400,000 order of branded materials, the invoice becomes ₦400,000 plus ₦30,000 VAT, a total of ₦430,000. The shop updates its price list and invoice template before the change, not after.
Practical steps
- Track turnover monthly so you know when you are approaching ₦100 million. Our bookkeeping guide shows a simple sales log.
- Do not show VAT on invoices unless you are registered for it. Charging VAT you are not entitled to collect causes problems.
- If you cross the threshold, register, update invoices and set aside VAT collected in a separate place so it is not spent.
- Learn the e-invoicing and fiscalisation requirements that apply to VAT-registered businesses; see e-invoicing in Nigeria.
- Revisit pricing; see how to price products and services.
If you are registered, set VAT aside
VAT you charge is not your money. It belongs to the tax authority from the moment the customer pays. Move it to a separate balance each week so it is there when the return is due. Keep the purchase invoices on which you paid VAT, because those support any input VAT you claim. If you stop trading or drop below the threshold, check the deregistration rules rather than simply stopping.
Telling customers about a change
If you move from not charging VAT to charging it, tell regular customers before the first invoice that includes it. Business customers usually accept it because they can often reclaim it. For individual customers, decide in advance whether to absorb some of the 7.5% or pass it on in full, and update every price list, menu and quote at the same time so nobody is surprised.
VAT is separate from income tax
A company's VAT position and its income tax position are different questions. A small company is also taxed at 0% company income tax if it meets the full small company test, which includes the ₦250 million fixed asset limit and excludes professional services. Read small company tax under the Nigeria Tax Act 2025.
When in doubt about a specific product or service, ask the tax authority before you change your prices.
Where Pryme fits
If you do charge VAT, keeping it apart helps. A Pryme Business Account can hold separate account details for different purposes through multiple accounts, and the Finance agent can prepare a monthly turnover and VAT summary for a person to approve.
Questions people ask
What is the VAT threshold in Nigeria for small businesses?
Small businesses with annual turnover of ₦100 million or less are not required to charge VAT or file VAT returns under the 2025 reforms.
What is the VAT rate in Nigeria in 2026?
7.5%. The reforms retained the existing rate.
Can a small business register for VAT voluntarily in Nigeria?
Yes. The law allows a small business to opt in by written notice to the tax authority.
Does selling my old equipment count towards the VAT threshold?
No. Sales of capital assets, and supplies made because you are selling or closing the business, are disregarded when measuring small business status.
Sources
- Nigeria Tax Administration Act 2025 (Gazette copy) · accessed Oct 2026
- Govt highlights 50 tax reliefs and exemptions for low-income earners and SMEs (AllAfrica) · accessed Oct 2026
- PwC Nigeria: The Nigeria Tax Reform Acts, top 20 changes to know · accessed Oct 2026
- Mondaq: Nigeria's 2025 tax laws and their benefits for SMEs · 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.