Nigeria Scraps VAT on Stakes but Tightens Grip on Gaming Revenue

At the latest monthly webinar organised by SLEC Africa, tax experts revisited Nigeria’s evolving fiscal framework with specific focus on the gaming and betting sector, reports Iyke Bede

The session, ‘Nigeria’s Tax Reforms and the Gaming Industry: Compliance, Risk and Commercial Impact’, where Head, Tax Compliance at WYZE, Adedoyin Oriadetu, made a presentation, served as a follow-up to last month’s discussion and highlighted key updates affecting lottery, sports betting, and related operators.

A major change concerns the value-added tax. Stakes, the money players use to place bets, are now exempt from VAT, resolving a longstanding point of uncertainty for operators. Winnings from lottery, gaming, and reality shows, however, are now subject to withholding tax. Residents pay five per cent on prizes, while non-residents are taxed at 15 per cent. These deductions are applied before the prize is disbursed.

The corporate tax structure has also been revised. Several smaller legacy taxes, including the Education Tax and the Police Fund levy, have been consolidated into a single four per cent development levy on company profits. Business expenses are more broadly deductible. Any cost that is wholly and exclusively incurred for business purposes, and properly documented, can now be subtracted before calculating taxable profits. This change applies across gaming operations, including technology and operational expenses.

Large operators, particularly multinational gaming groups, are subject to the new Minimum Effective Tax Rate framework. Companies with annual turnover above ₦50 billion, or part of global groups earning more than €750 million, must pay a minimum effective tax rate of 15 per cent. If tax incentives or exemptions reduce their liability below this threshold, a top-up tax applies. A company is considered Nigerian for tax purposes if its central management and control are exercised in Nigeria, even if it is incorporated abroad.

Compliance requirements have tightened. VAT-registered businesses must issue electronic invoices through systems linked directly to the Federal Inland Revenue Service. Manual receipts are no longer sufficient. Companies that engage vendors without a valid Tax Identification Number face a ₦5 million administrative fine. Failure to deduct VAT or Withholding Tax carries a 40 per cent penalty on the unpaid amount. Withholding tax must now be withheld at the point of payment or when the liability is recorded, whichever occurs first.

Cross-border payments from local operators to foreign parent companies for services or technology must reflect arm’s-length pricing. This ensures that fees are fair and prevents profit shifting outside Nigeria.

Smaller gaming businesses receive limited relief. Companies earning ₦50 million or less annually are classified as small and are exempt from withholding tax on transactions below ₦2 million per month, provided suppliers have a valid Tax Identification Number. Contracts valued below ₦1 million and employment agreements are exempt from stamp duty, reducing administrative requirements and minor transaction costs.

The webinar reveals that while VAT on stakes has been removed, the government is tightening oversight on profits, winnings, and compliance processes across the gaming industry. Operators now face stricter reporting obligations, heavier penalties, and a wider tax net, while small business exemptions provide some relief within defined limits.