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
When a foreign supplier invoices a Nigerian business without Nigerian VAT, the Nigerian customer must self-account for 7.5% VAT under the reverse charge and pay it to the NRS. Withholding tax is also deducted from the payment, typically 10% for consultancy and professional fees to non-residents, unless a treaty or the labelled-startup rule applies.
When a Nigerian business pays a foreign firm for services, such as consulting, software development, design, legal advice or cloud support, the foreign supplier usually does not charge Nigerian VAT. That does not make the service VAT-free. Nigeria uses a reverse charge: the Nigerian customer accounts for the 7.5% VAT itself. The same payment may also need withholding tax deducted before the money leaves. This guide explains both, and how they fit together on a single invoice.
Why the customer pays the VAT
PwC's Nigeria summary (reviewed 29 May 2026) states that "there is a reverse-charge mechanism for services from which no tax invoice was received". Mondaq's May 2026 review of the VAT provisions of the Nigeria Tax Act 2025 notes that section 155(2) allows the recipient of a taxable supply invoiced without VAT to be directed to self-account for it. The policy is simple: a foreign firm with no Nigerian presence cannot easily be made to collect VAT, so the Nigerian buyer does it instead.
Two groups of foreign suppliers are different:
- Appointed non-resident digital companies. PwC says non-resident digital companies appointed by the tax authorities must charge, collect and remit VAT to the NRS. If the supplier's invoice already shows Nigerian VAT, you do not self-account a second time. Our guide to VAT on digital services sold into Nigeria covers this.
- Registered non-residents. Section 6 of the Nigeria Tax Administration Act 2025 requires a non-resident supplying taxable goods or services to anyone in Nigeria to register and obtain a Tax ID. Where such a supplier charges VAT on its invoice, follow the invoice.
How self-accounting works
- Check the invoice. No Nigerian VAT shown, and the service is used in Nigeria: self-account.
- Calculate 7.5% of the naira value of the service. Convert the foreign currency at the rate at the time of the transaction and keep evidence of the rate used.
- Pay the VAT to the NRS and include it in your VAT return for the period. PwC notes that VAT returns are filed on a cash basis, which generally points to the month you pay; confirm with the NRS how to show it on the current return form.
- Claim input VAT if you can. PwC says input VAT on services and fixed assets used for taxable supplies can be recovered, claimable within five years. A fully taxable business that self-accounts can usually recover the same amount, so the net cost may be nil, but only if you file both sides correctly.
- Keep the records: contract, invoice, proof of payment and the VAT payment receipt.
Not doing it has a cost. Section 107(2) of the Administration Act says a person required to self-account who fails to do so on time pays the tax, an administrative penalty of 10% per annum of the amount, and interest at the CBN Monetary Policy Rate.
Withholding tax on the same payment
VAT is a tax on the service. Withholding tax is an advance or final tax on the foreign supplier's income, deducted by you from the amount you pay. PwC's highlights of the Deduction of Tax at Source (Withholding) Regulations 2024 give non-resident rates including:
| Payment to a non-resident | WHT rate (2024 Regulations) |
|---|---|
| Consultancy, technical, management or professional fees | 10% |
| Other services | 5% |
| Royalties | 10% |
| Commission and brokerage | 10% |
PwC describes WHT on these non-resident payments as the final tax, and its income determination page says royalty WHT can fall to 7.5% where a double tax treaty expressly provides. The regulations require the payer to remit to the federal tax authority by the 21st of the following month and issue a receipt. Note that a labelled startup has a special rule: section 51(8) of the Administration Act sets a 5% final deduction on technical, consulting, professional or management services provided by a non-resident to a labelled startup. See withholding tax for non-resident companies and the UK–Nigeria treaty.
Worked example (illustrative figures)
A Lagos company, not a labelled startup, hires a foreign consulting firm. The invoice shows no Nigerian VAT and its naira equivalent at the transaction date is ₦15,000,000. The contract says the fee is gross, with taxes deducted as Nigerian law requires, and no treaty reduction applies.
- WHT at 10%: 10% × ₦15,000,000 = ₦1,500,000, remitted to the NRS by the 21st of the next month.
- Paid to the consultant: ₦15,000,000 − ₦1,500,000 = ₦13,500,000.
- VAT self-accounted at 7.5%: 7.5% × ₦15,000,000 = ₦1,125,000, paid to the NRS by the company.
- Input VAT: if the consultancy is used for taxable supplies, the company may claim ₦1,125,000 back as input VAT.
If the contract says the fee is net of all Nigerian taxes, the company bears the WHT itself and must gross up, so check the wording before signing.
What to check first
- Does the invoice show Nigerian VAT? If not, plan to self-account.
- Is the supplier an appointed digital company or registered with the NRS?
- Which WHT rate applies, and does a treaty reduce it?
- Does the contract say gross or net of tax?
- Do you hold the startup label?
- Are both the VAT and the WHT in your monthly returns?
Where Pryme fits
A Pryme Business Account holds NGN, USD, GBP and EUR with local account details for each, so you can pay a foreign supplier in its currency after converting with Swap, where the rate is shown first and the fee sits on its own line. Outside Nigeria, these services run through regulated partners. Your payment records then support the naira values on your VAT and WHT returns.
Questions people ask
Do I pay VAT on services from a foreign company in Nigeria?
Yes. Where the foreign supplier does not charge Nigerian VAT, the Nigerian customer self-accounts for 7.5% VAT under the reverse charge and pays it to the NRS.
What is the WHT rate on payments to a foreign consultant?
Under the 2024 withholding regulations, as summarised by PwC, consultancy, technical, management and professional fees paid to non-residents attract 10%; other services 5%. A treaty may reduce some rates.
What happens if I don't self-account for VAT?
Section 107(2) of the Nigeria Tax Administration Act 2025 imposes the tax, a 10% per annum penalty and interest at the CBN Monetary Policy Rate.
Can I claim back reverse-charge VAT?
If the imported service is used to make taxable supplies, input VAT on services is recoverable under the 2025 rules, claimable within five years, according to PwC.
Sources
- PwC Worldwide Tax Summaries: Nigeria corporate other taxes (reviewed 29 May 2026) · accessed Oct 2026
- Mondaq: Examination of the VAT provisions under the Nigeria Tax Act 2025 (28 May 2026) · accessed Oct 2026
- Nigeria Tax Administration Act 2025 (gazette copy) · accessed Oct 2026
- PwC Nigeria: Highlights of the Deduction at Source (Withholding) Regulations 2024 · accessed Oct 2026
- PwC Worldwide Tax Summaries: Nigeria corporate income determination (reviewed 29 May 2026) · 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.