Nigerian banks and financial technology companies have commenced the deduction of 7.5 per cent Value Added Tax (VAT) on ATM card issuance and maintenance fees, following directives from the federal government. The Nigerian Revenue Service (NRS) has clarified that this charge applies solely to service fees and not to customers' account balances or savings, emphasising that it is not a new tax but an enforcement of existing VAT regulations, with banks acting as collection agents for the government.
NRS Clarifies Scope of VAT Deduction
The NRS has moved to allay fears among bank customers who noticed additional deductions linked to ATM card charges. Many Nigerians feared the Federal Government had introduced another tax burden amid rising living costs. However, the revenue agency stressed that VAT has always been applicable to taxable goods and services under Nigerian tax laws. The current directive is simply an enforcement measure to ensure banks and fintech companies comply with the existing VAT framework. Financial institutions are acting as collection agents, deducting the VAT from applicable service fees and remitting it to the government.
How the VAT Is Calculated
According to the NRS, the 7.5 per cent VAT applies only to the actual service fee charged by banks and fintechs for ATM card issuance or monthly maintenance. It does not apply to the total amount held in a customer's account. For instance, if a bank charges N50 as a monthly card maintenance fee, the VAT will be calculated on that N50. At 7.5 per cent, the VAT amounts to N3.75, bringing the total deduction for the service to N53.75. This means customers are not being taxed on their savings, deposits, or account balance, but only on the specific banking service they use.
Examples of Charges
The impact on customers will depend on the specific fee charged by their bank or fintech provider. For a service fee of N50, the VAT at 7.5 per cent is N3.73, making a total charge of N53.75. For a fee of N100, the VAT is N7.50, totalling N107.50. For a fee of N1,000, the VAT is N75.00, resulting in a total of N1,075.00. This shows that the VAT is proportionate to the service fee and not a flat charge on all account holders.
What It Means for Customers
For millions of Nigerians, the immediate effect will be a slight increase in the cost of obtaining or maintaining an ATM card. While the additional amount may appear small, it could add to concerns over rising banking charges and the broader cost of living. Banks and fintechs are expected to display the VAT separately on transaction receipts or account statements, making it easier for customers to understand what portion of the deduction is the original service fee and what portion is tax. The NRS urged customers to note that the VAT deduction should only apply to eligible banking services. Any deduction beyond the approved service fee and its corresponding VAT should be reported to the relevant financial institution or regulatory authority, according to a report by TheCable.
Background: CBN Raises ATM Card Issuance Fee
Legit.ng earlier reported that the Central Bank of Nigeria (CBN) has raised the cost of issuing and replacing ATM debit and credit cards to N1,500, marking a 50 per cent increase from the previous N1,000 fee. The directive applies to banks across the country, including major lenders such as Access Bank and United Bank for Africa, which are expected to implement the revised charges in line with the regulator's new guidelines. The change forms part of the apex bank's updated framework governing bank charges and service fees in Nigeria.
