Freelance Platform Fees and Nigerian Tax: What Freelancers Should Know

Understanding the difference matters because these amounts do not have the same tax treatment.

Take Upwork as an example. Its current guidance for freelancers in Nigeria says it charges 7.5% Nigerian VAT on services it provides to freelancers, including the Freelancer Service Fee, Freelancer Plus plan and Connects. Upwork gives the example that a $100 service fee attracts $7.50 VAT, bringing the charge to $107.50.

That VAT is attached to the service Upwork provides to the freelancer. It is separate from the income the freelancer earns from a client.

The platform fee and your freelance income are different tax items

Suppose a Nigerian freelancer completes a project worth $1,000 through a platform. The platform may deduct its service fee before the freelancer receives the balance. If the platform also charges VAT on its service fee, that VAT is another amount appearing in the transaction.

For income tax purposes, the important question is the freelancer’s income from the business activity and the expenses incurred in producing that income.

The Nigeria Tax Act 2025 provides that, in determining the profits or loss from a trade, business, profession or vocation, expenses wholly and exclusively incurred in the production of the income may be deducted, subject to the Act. The Act also excludes domestic or private expenses and other specified expenses from deduction.

That creates an important connection between platform fees and Nigerian income tax.

A freelancer who pays a platform to access clients, process payments, provide marketplace services or otherwise facilitate the business may have an expense connected to earning that income. The treatment, however, depends on whether the particular expense satisfies the statutory requirements. It should therefore not be presented as an automatic deduction simply because the platform calls it a “business fee.”

The freelancer should retain the platform invoice or transaction record showing the fee, the date, the amount and what the charge was for.

What about the 7.5% VAT on Upwork fees?

This is where the Upwork example becomes particularly useful.

Under its current Nigeria guidance, Upwork says Nigerian freelancers are subject to 7.5% VAT on applicable Upwork services, including the Freelancer Service Fee, Freelancer Plus and Connects. It also says providing a Nigerian VAT ID does not remove the VAT charge.

This is consistent with the broader structure of Nigeria’s VAT rules. The Nigeria Tax Act 2025 provides for VAT on taxable services supplied to and consumed by a person in Nigeria, including where the service is rendered from outside Nigeria. It also provides mechanisms for non-resident suppliers to comply with Nigerian VAT obligations.

So, if a freelancer in Nigeria sees VAT added to an eligible Upwork service, that charge should not automatically be confused with VAT on the freelancer’s own client income.

The invoice should be read carefully: what service was supplied, who supplied it, what amount is the fee, and what amount represents VAT?

Your client income still needs to be accounted for

The platform’s VAT charge does not settle the freelancer’s own income tax obligations.

The 2026 Personal Income Tax Guidelines require every taxable individual to file an annual income tax return by 31 March of the relevant year of assessment for the preceding basis period. The return must disclose income from every source. Where the income comes from a trade, business, profession or vocation, the guidelines require an audited financial statement or a statement of accounts attested by the taxpayer.

For a freelancer, that means income earned through platforms should form part of the records used to determine the person’s taxable income. Platform statements can therefore become useful supporting records alongside invoices, bank statements, payment records and expense documentation.

This is also why freelancers should avoid treating the amount that finally reaches their bank account as the only figure worth recording.

If a client pays $1,000, the platform deducts a service fee and separately charges VAT on that service fee, there are different transactions within that $1,000 movement. Keeping the records separate makes it easier to establish the gross income, the platform expense and the VAT charged on the platform’s service.

Keep the records behind the numbers

The new tax framework puts considerable emphasis on proper records. For a freelancer, that means keeping more than screenshots of successful withdrawals.

Keep your platform invoices and transaction histories, client invoices or contracts, payment records, bank statements and records of platform fees. Where VAT is charged on a platform service, retain the relevant invoice showing the VAT separately.

This becomes particularly useful when income is earned in foreign currency. The Nigeria Tax Act provides that an expense incurred in a currency other than the Naira may only be deducted to the extent of its Naira equivalent at the applicable official exchange rate published by the Central Bank of Nigeria for the relevant date or period.

That means a freelancer should not simply convert figures using whatever exchange rate happens to appear on a personal banking app months later when preparing their records. The relevant records should show the original currency, the date and the basis used for the Naira equivalent.

What freelancers should take from this

Freelance platforms can create several tax records in a single transaction. Your client income, platform fee and VAT charged by the platform should be identifiable in your records.

For Upwork users in Nigeria, the platform currently confirms that 7.5% VAT applies to specified services it provides to Nigerian freelancers, including service fees, Connects and Freelancer Plus.

For income tax, the bigger issue is maintaining enough information to establish your actual business income and the expenses that meet the requirements for deduction under Nigerian tax law.

If you freelance regularly, keeping these records throughout the year is much easier than trying to reconstruct your income and expenses when your annual return is due.

LessaTax helps freelancers keep their income, expenses, receipts and other tax records organised throughout the year, so their tax reporting does not start with a pile of scattered transactions.