VAT attribution under Nigeria’s tax reforms: A legal mandate without implementation support

Prior to the recent Nigerian tax reforms, VAT was administered under the Value Added Tax Act, Cap V1, LFN 2004 (as amended), with businesses required to file VAT returns with the Federal Inland Revenue Service (FIRS) office where their head office was registered. Over time, this practice resulted in an imbalance in VAT revenue attribution. States hosting a large number of corporate headquarters received a disproportionately larger share of VAT revenue, while other states with significant consumption levels but fewer corporate headquarters received a much smaller share.

In response, Section 22(11) of the Nigeria Tax Administration Act (NTAA) seeks to realign VAT administration with the core principle of consumption‑based taxation. It does this by shifting VAT reporting and attribution from a head‑office‑location approach to a consumption‑location‑based system. However, despite the reforms taking effect on 1 January 2026, the Nigeria Revenue Service (NRS) is yet to introduce the administrative mechanisms necessary to facilitate the transition. This has created uncertainty for taxpayers, as well as for states and local governments whose VAT revenue allocations depend on effective attribution.

Why is attribution important?

Section 81 of the NTAA governs the distribution of VAT revenue among the tiers of government, allocating:

• 10% of VAT revenue collected to the federal government
• 55% to states and the FCT, and
• 35% to local governments

The portion allocated to states and local governments is further distributed based on:

• Equality – 50%
• Population – 20%, and
• Consumption – 30%

Because consumption is a key basis for distribution, accurately attributing where taxable supplies are consumed is vital to determining how VAT revenue is shared among states and local governments. Section 22(11) of the NTAA therefore requires taxpayers to provide details of where taxable supplies are consumed, regardless of where the VAT return is filed.

Implications for taxpayers 

Despite this clear legal framework, current administrative practices remain inconsistent with the requirements of the law. Three months into the implementation of the reforms, VAT filings still do not reflect the place of consumption, and the VAT sales schedule uploaded to TaxPro Max has not been updated to request the information necessary for consumption‑based attribution.

This lack of clarity around implementation raises potential compliance concerns, particularly in light of Section 106 of the NTAA, which prescribes an administrative penalty of ₦1,000,000 for failure to attribute. Taxpayers have already submitted VAT returns for January and February 2026 without any formal guidance from the NRS on how such attribution should be made.

What should taxpayers do now?

Pending the introduction of a formal reporting mechanism for consumption‑based VAT attribution, taxpayers are advised to:

• Maintain internal records and documentation relating to the location of consumption of their taxable supplies, where feasible; and
• Ensure that systems and processes can capture consumption‑location data once the NRS provides further guidance.

Such documentation and internal controls may become critical once the NRS introduces the necessary reporting mechanisms to fully operationalise the consumption‑based VAT attribution framework.

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