The Executive Chairman of the Federal Inland Revenue Service (“FIRS”) was recently said to have stated at a technical workshop organised by the African Tax Administration Forum in Abuja that, commencing in January 2020, Nigerian banks will be required to charge value added tax (“VAT”) on local and foreign online transactions. The announcement by the Executive Chairman of the FIRS has generated a lot of opinions, both for and against the FIRS’ proposal.
We have provided below some fundamental information you need to note in respect of the VAT regime in Nigeria.
· In line with the fundamental principle on taxation, VAT is created by law – the Value Added Tax Act, Cap V1, Laws of the Federation of Nigeria, 2004 (“VAT Act”);
· VAT is a consumption tax charged and payable on the supply of ALL goods and services, except exempted goods and services;
· The VAT rate is 5% on the value of all taxable goods and services, except zero-rated goods and services;
· Every taxable person is required to register with the FIRS for the collection and remittance of VAT on all invoiced amounts of taxable goods and services sold or rendered by the taxable person;
· “Taxable person” includes a person (this covers entities) who carries out in a place an economic activity, a person exploiting tangible or intangible property for the purpose of obtaining income from such property by way of trade or business;
· VAT is payable in the currency of the underlying transaction;
· Failure to remit and/or collect VAT attracts relevant penalties as provided in the VAT Act; and
· The goods exempt from VAT include all medical and pharmaceutical products, basic food items, books and educational materials and baby products; while the services exempted include medical services, services rendered by community banks, people’s banks and mortgage institutions and all exported services.
While the proposed action of the FIRS would improve government revenue, it is necessary for the FIRS to conduct in-depth analysis of the proposed directive with a view to addressing the issues that have been raised by stakeholders and tax practitioners, including the possibility of double taxation.
The contents of this news alert are meant for the general information of our clients and friends and do not amount to legal advice. All enquiries on the subject may be made to: email@example.com
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