Value Added Tax (VAT) is a tax charged and payable on the supply of goods and services except those specifically listed in the first schedule to the VAT Act. In Nigeria, the current rate for VAT is 5% and although it is a multi-stage tax, the target is usually the final consumer. Below are random facts you need to know about VAT.
1. It is NOT only when money is involved in your transaction that you charge VAT. If your transaction is for a consideration that does not involve money, you are required to value the transaction in monetary terms and then charge 5% as VAT. See section 5 (1!) (b) VAT Act
2. Your company’s evidence of registration with FIRS is a condition precedent to transacting business with any government ministry, statutory body or other agency of the Federal, State or Local Government? See section 9 (2) VAT Act
3. If your company (non-resident company) does business in Nigeria without being registered in the country, the law mandates your company to register for VAT with the FIRS using the address of the resident company which you transacted with. This is to ensure ease of communication. The way to go about this is to include VAT charges in your invoice to the Nigerian company. Interestingly, that company is empowered to serve as a collection agent for that purpose and remit the VAT on your behalf. Section 10 VAT Act
4. In the event that you are not satisfied with a VAT assessment imposed on you by a tax authority, you have a right to appeal to the Value Added Tax Appeal Tribunal for redress. Section 20 (2) VAT Act
5. Any imposition of or increase/reduction in tax (including VAT rate) ought to be presented before the National Assembly as an extension of its spending and taxing powers. SECTION 59 of the 1999 Constitution (as amended).
While this article is not exhaustive, it would be interesting to hear your random point of view with regards to VAT in Nigeria.