FIRS Introduces Circular to Aid Implementation of VAT Amendments

On the 29th of April 2020, the FIRS released a publication on the recent changes in line with the Finance Act 2020, the purpose of which was to clarify, explain and guide taxpayers and tax practitioners as any circular formerly released circular which is inconsistent with the current provision is to be updated and replaced.

The circular touches on the definition of goods, rate of tax, transactional issues, Registration and non- registration and a lot more.

Section 2 of the provision states that VAT is chargeable on,

1. goods which include property (tangible or intangible) such as articles of trade, rights in goods or property (e.g. rights in mineral resources, copyrights, trademarks), assets, motor vehicles, oil wells, rigs, aircrafts, ships, buildings, roads, jetties, or any other type of property
2. services, where:
3. the services are rendered in Nigeria by a person physically present
4. in Nigeria at the time of providing the service, or
5. the services are provided to a person in Nigeria, regardless of
6. whether the services are rendered within or outside Nigeria

What this means is that VAT charges apply to tangible and intangible goods and services that are rendered or received by a person physically present in Nigeria. The circular also clearly states that it is not chargeable on a Nigerian resident that is not physically present in the country.

Moving forward, the circular touches on section 4 of the act which increases VAT rate from 5% to 7.5%, it states that this new rate is effective on all transactions that carried out from 1st of February 2020.

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Furthermore, Section 8 of the act on Registration and Deregistration, the Act increases the penalty of failure to register to N10,000 – N 50,000 for the first month and N 50 –  N 250,000 subsequently.

The circular also examined a lot more of salient provisions of the act such as section 14 which introduces “Self Account Provision” and Section 15 which is the “Introduction of VAT Threesome” and a host of others.

Conclusively, it is important to note that this circular supersedes all other publications that have been recently given by the FIRS on VAT to the degree of any irregularity and might be changed at any time. To this end, it is crucial for all public operators and businesses to stay abreast of all six relevant information that may be important to their operations, both short term and on the long term. This would help reduce the risk on non-compliance