OpenAI, the prominent artificial intelligence research company, has announced it will commence collecting a 7.5% Value-Added Tax (VAT) on its services offered to users in Nigeria. This new taxation policy is set to take effect from November 1, 2025. In an official email dispatched to its subscribers, OpenAI clarified that this move is a direct response to comply with Section 10 of the Value Added Tax Act, Laws of the Federation of Nigeria 2004 (as amended), along with adherence to the FIRS Information Circular 2021/19.

The 7.5% VAT will be uniformly applied across all paid OpenAI subscriptions and services billed within Nigeria. This includes popular offerings such as ChatGPT Plus and any other AI-driven services provided by the company. OpenAI has advised its Nigerian users possessing a valid Tax Identification Number (TIN) to update their account information by adding it to the payment section. This step is crucial for ensuring accurate tax documentation and compliance.

This development is part of a broader trend where Nigeria is intensifying its efforts to enforce tax compliance among foreign digital service providers operating within its borders. Several other global technology giants have already implemented similar VAT policies. For instance, Google initiated charging Nigerians VAT on its products in 2022. Moreover, companies like Netflix, Facebook, and Amazon have already integrated similar VAT directives for their Nigerian customer base, with recent reports indicating that Nigeria has successfully collected an estimated ₦600 billion in VAT from these foreign entities.

While the concept of VAT directives for foreign companies is not entirely novel in Nigeria, recent amendments to the Value Added Tax Act now explicitly mandate non-resident digital firms to directly collect VAT from their Nigerian users and subsequently remit these funds to the Federal Inland Revenue Service (FIRS). Despite these changes, government officials have consistently maintained that no new taxes are being introduced under President Tinubu's administration. Instead, the focus is on a comprehensive restructuring of existing tax frameworks, consolidating various levies, and rigorously ensuring compliance across the board. Taiwo Oyedele, Chairman of the Presidential Committee on Fiscal Policy & Tax Reforms, explicitly challenged critics to "point to one newly added tax."

OpenAI's adherence to these regulations further signifies the increasing integration of global technology firms into Nigeria's evolving digital tax ecosystem. This trend presents both advantages and disadvantages for the West African nation. On one hand, it enables Nigeria to generate significant income from international companies providing services to its citizens. On the other hand, it inevitably leads to increased costs for individual users and businesses that rely on these digital services. For example, a ChatGPT Plus subscription, currently priced at ₦31,500 ($20) per month, will see its cost rise to ₦33,862.50 ($22.43) with the inclusion of the 7.5% VAT. This price escalation could also have ripple effects on local AI startups, such as Decide and ChatATP, which have built their business models upon OpenAI's foundational infrastructure.

In an interesting move to mitigate the impact of this price adjustment on its Nigerian user base, OpenAI has recently introduced a more affordable subscription tier specifically for Nigerians, priced at ₦7,000 per month. This initiative aims to cushion the financial effect of the impending VAT charges, making its services more accessible despite the new tax obligations.