What You Need to Know About the 7.5% VAT on Bank Transfers, USSD Transactions Starting January 19

By Tgnews Reporter

Beginning Monday, January 19, 2026, banks and fintech platforms such as Moniepoint, OPay, Kuda, and others will start collecting and remitting 7.5% Value Added Tax (VAT) on certain electronic banking service fees, in line with a directive issued by the Nigeria Revenue Service (NRS), formerly known as the Federal Inland Revenue Service.

This adjustment, which has been communicated through recent customer notices from various platforms, is intended to bring consistency to the way digital financial services are taxed throughout the sector.

It covers commercial banks, microfinance banks, and electronic money transfer operators, and forms part of the wider tax reforms introduced under the Nigeria Tax Act 2025.

The goal is to apply VAT uniformly to taxable services in Nigeria’s rapidly expanding digital economy, much like the tax already applies to everyday purchases.

A common source of worry is the belief that the 7.5% VAT will be taken straight from the money being sent. For example, many people assume that transferring ₦100,000 would result in the government claiming ₦7,500.

This understanding is incorrect. The VAT is applied only to the service fee that your bank or fintech platform charges for processing the transaction, and it does not touch the principal amount you are actually sending.

This follows the same principle as paying 7.5% VAT when buying a bottle of soft drink or recharging your mobile data plan—the tax targets the cost of the service itself, not the main value involved.

To make this clearer, consider a typical mobile transfer of ₦100,000. If the bank or app charges a service fee of ₦50 for handling the transaction, the 7.5% VAT on that fee amounts to just ₦3.75.

In addition, the standard flat Electronic Money Transfer Levy, now reclassified as Stamp Duty, remains ₦50 for any transfer of ₦10,000 or more.

When you add everything together, the total additional cost to you becomes ₦53.75 on top of the ₦100,000 principal, meaning the recipient receives ₦100,000 while you pay ₦100,053.75 overall. The new VAT component contributes only ₦3.75, an amount so small it is unlikely to be felt in daily use.

The same logic applies to USSD transactions, such as those made through codes like *737# or *919#. If a session or transaction fee of ₦20 is charged, the 7.5% VAT on that fee works out to ₦1.50. The total cost for the session then becomes ₦21.50.

Once again, the extra tax is measured in kobo rather than naira, ensuring the change remains negligible for most people who rely on these quick and accessible methods.

All these charges appear clearly itemized on your transaction receipts and account statements, so you can always see exactly what is being applied. It is also worth noting that interest earned on savings accounts or fixed deposits continues to be exempt from this VAT according to the reform.

The Nigeria Revenue Service has established January 19, 2026, as the nationwide deadline for full compliance, requiring uniform collection of VAT on electronic banking charges.

These charges include fees for mobile transfers, USSD sessions, card issuance, and other related digital services.

By enforcing this standard across the board, the government is addressing previous inconsistencies in how VAT was applied in the sector while generating additional revenue from non-oil sources to support national development amid the surge in digital payments.

This new VAT requirement is entirely separate from the ₦50 Stamp Duty that applies to electronic transfers of ₦10,000 and above. That flat levy was restructured and continues unchanged under the updated tax framework effective from January 1, 2026.

For the millions of Nigerians who depend on mobile and USSD banking for sending money to family, paying bills, or handling everyday expenses, the practical effect of this change remains very limited, often adding only a few extra naira or kobo to each transaction.

Banks and fintech companies have stressed that they are not increasing their own fees; they are simply fulfilling a legal obligation to collect and forward the prescribed VAT to the government.