The Federal Inland Revenue Service, FIRS, has appointed telecommunications giants MTN and Airtel as well as deposit banks in the country to withhold Value Added Tax, VAT, on all taxable supplies made to them.
The companies are to remit such VAT to the revenue service on or before the 21st day of the month immediately following the month the tax was withheld, in the format prescribed by the service.
The FIRS Executive Chairman, Mr. Muhammad Nami, made the announcement in a Public Notice yesterday, 7th November, 2022.
He explained the role of the companies and the obligations of their suppliers with regards to the withholding of Value Added Tax.
According to him: “This Notice is given to all persons carrying on trade, profession or business of any kind, tax practitioners and the general public that, with effect from 1st January, 2023; in line with the provisions of Section 14(3) of the Value Added Tax Act Cap. V1 LFN 2004 (as amended), the following companies are appointed to withhold or collect VAT charged on all taxable supplies made to them: MTN; Airtel; and all money deposit banks – as defined by the CBN Guidelines.”
While the tax withheld or collected are to be shall be remitted in the format prescribed by the Service, it must be done separately from VAT due on the companies’ taxable supplies.
However, there are available options to suppliers of these companies whose output tax is withheld.
A supplier whose output tax is withheld may deduct the input tax paid on the goods purchased or imported to make the taxable supply from the output tax collected on other taxable supplies and where the input tax paid to make the supply is not fully recovered from the output tax on other taxable supplies, the balance is refundable to the supplier; provided that a supplier who is entitled to a refund may utilise the amount refundable to offset future VAT liability or request for a cash pay-out.
The FIRS said it has instituted adequate measures to ensure prompt payment of refundable input tax under this arrangement. Also, input tax claims, which include refunds, are subject to the limitations imposed by Section 17(2)(a) of the VAT Act.
VAT is governed by Value Added Tax Act Cap V1, LFN 2004 (as amended). It is a consumption tax paid when goods are purchased and services rendered.
VAT is a multi-stage tax borne by the final consumer and all goods and services (produced within or imported into the country) are taxable except those specifically exempted by the VAT Act. VAT is charged at a rate of 7.5% but some goods and services such as non-oil exports are zero rated.
All taxable persons are required to file VAT monthly returns not later than 21st day following the month of transaction.
Under the Nigerian VAT regime, three groups of taxpayers are obligated to deduct VAT at source and remit directly to the tax authority.
- Nigerian companies that are carrying on VATable transactions with non-resident companies within the country;
- Government ministries, statutory bodies and other agencies of government; and
- Companies operating in the oil and gas sector.