Yes — since 1 January 2026, Nigerian businesses can claim input VAT on services and fixed assets, not just raw materials. The Nigeria Tax Act 2025 replaced a rule that, for nearly three decades, limited input VAT recovery to goods bought for resale or as production materials. Many finance teams still don't know the rule changed, and it is quietly costing them real credits.
What Was the Old Rule, and Why Did It Cost Businesses Money?
Under Section 17 of the old VAT Act, input VAT was creditable only on goods purchased or imported directly for resale, or as raw materials converted into another product for resale. Everything else — legal and audit fees, IT subscriptions, marketing spend, rent, insurance, plant and equipment — was VAT you paid but could never claim back. It sat in your books as a straight cost. A trading company reselling imported goods could recover the 7.5% VAT on its stock; a bank, an NGO, a shipping agency, or a consultancy buying the exact same VAT-bearing services could not. For services-heavy businesses, that restriction was expensive, and it is still the rule most finance teams assume applies today.
What Changed Under the Nigeria Tax Act 2025?
The Nigeria Tax Act 2025, in force from 1 January 2026, significantly widens what counts as deductible input VAT. Input VAT incurred by a registered person on any taxable supply — including services and fixed assets — may now be claimed, provided it relates to taxable output. In practice, that means:
- Services: VAT on professional fees, IT, marketing, and other services is now creditable when the service relates to your taxable supplies — previously it was expensed in full.
- Fixed assets: VAT paid on plant, equipment, and other capital expenditure used for taxable supply activities is now recoverable.
- Raw materials and goods: Remain creditable as before — nothing changes there.
Didn't a Tax Tribunal Already Rule on This? Inside the CHI Limited Case
This shift did not come out of nowhere. In February 2022, the Lagos division of the Tax Appeal Tribunal ruled on CHI Limited v FIRS, a dispute over roughly ₦173.4 million in input VAT that FIRS had rejected on gas, short-term spares, and consumables used directly in CHI's production line, on the grounds that these were mere "overheads." The tribunal disagreed, holding that "stock-in-trade" should be read in its ordinary sense and extends beyond raw materials to tools, supplies, and production inputs directly linked to the finished product. CHI won. That ruling was a signal that Nigeria's narrow, decades-old reading of input VAT was already under pressure years before the Nigeria Tax Act 2025 made the broader rule explicit and universal, rather than something manufacturers had to fight a tribunal to establish case by case.
What Are the New Limits and Conditions?
The expanded rule is not unlimited. Input VAT is creditable only to the extent it is attributable to taxable outputs — where a supply is used for both taxable and exempt activities, you apportion the claim by the taxable-use proportion, and VAT tied to exempt-supply activities still cannot be recovered. Claims must be properly documented with a valid VAT invoice, which matters more than ever with NRS e-invoicing enforcement now live — see our guide on preparing for NRS e-invoicing compliance. Claims must also be made within five years of the VAT being incurred. And there is a sting for capital assets specifically: if VAT or import duty was not properly paid and documented, that expenditure does not qualify for capital allowances either — under-documenting your VAT now carries a corporate income tax cost too, not just a VAT one.
Old rule vs. new rule, side by side:
- Raw materials/goods for resale — creditable before 2026, and still creditable now.
- Services (legal, IT, marketing, rent) — not creditable before 2026; creditable now if linked to taxable output.
- Fixed assets/equipment — not creditable before 2026; creditable now, subject to apportionment.
- Mixed-use supplies — not applicable before 2026; now apportioned by the taxable-use share.
- Exempt-supply inputs — not creditable before 2026, and still not creditable now.
What This Means for Your Business
- Re-audit your VAT returns from January 2026 onward. Check whether input VAT on services and capital expenditure since the new Act took effect was correctly claimed rather than simply expensed.
- Update your VAT coding in your ERP or accounting system. Many charts of accounts still route all service VAT straight to expense lines by default — that logic is now out of date.
- Build a defensible apportionment methodology now. If you have mixed taxable and exempt activities, document how you split input VAT before NRS asks you to.
- Tighten your e-invoicing and VAT documentation. Every claim now needs a valid, properly documented VAT invoice — sloppy paperwork is the fastest way to lose a legitimate claim.
- Manufacturers, revisit production-linked consumables. The CHI Limited precedent plus the new Act give you two independent grounds to claim input VAT on gas, spares, and consumables tied directly to your production line.
For the mechanics of filing these claims correctly, see our step-by-step guide on how to file VAT returns in Nigeria in 2026. Both myths — that withholding tax is always final, and that input VAT stops at raw materials — belong to the same family of outdated assumptions that quietly drain cash from otherwise well-run Nigerian businesses; we unpacked the first in Is Withholding Tax a Final Tax in Nigeria?.
FAQ
Is input VAT on services really deductible in Nigeria now? Yes. From 1 January 2026, the Nigeria Tax Act 2025 allows registered taxpayers to claim input VAT on services, not just raw materials, provided the service relates to a taxable supply and is properly documented with a valid VAT invoice.
Can I claim input VAT on equipment bought before 2026? The expanded rule applies from the Act's effective date of 1 January 2026 onward, so it governs VAT incurred from that date. Businesses should still review pre-2026 capital purchases for any input VAT claims that may have been available under prior case law such as CHI Limited v FIRS.
What happens if I claim input VAT without proper documentation? The claim can be disallowed, and for capital assets specifically, expenditure without properly paid and evidenced VAT or import duty will not qualify for capital allowances either — so poor documentation now carries both a VAT and a corporate income tax cost.
If you are not sure whether your business is leaving input VAT credits on the table, VOG Global Consult can review your VAT position and put a defensible claims process in place. Contact VOG Global today for tax, audit and advisory support built for Nigerian businesses. Suite 060 to 061, Orago Complex, Area 10, Garki, Abuja.