Nigeria: Guideline on VAT requirements of non-resident digital service suppliers

Following the new regime for value-added tax for non-resident persons in Nigeria, the Federal Inland Revenue Service (FIRS) issued ‘The Guidelines on Simplified Compliance for Value Added Tax (VAT) for Non-Resident Suppliers’ (the guidelines).

The guidelines deal particularly with the following VAT compliance affairs: require­ments for VAT registration under the regime; procedure for registration for VAT by non-resident suppliers (NRS); supplies that are taxable in Nigeria; appointment of NRS as VAT collection agents; procedure for remittance of tax collected; procedure for deregistration; general obligations of NRS under the act.

The guidelines define an NRS as a non-resident person who makes a supply by digital, electronic or other means and includes an intermediary who makes a supply on behalf of a non-resident person. Paragraph 26.0 of the guidelines defines the intermediary as any person, a digital interface or platform that facilitates the supply of goods, services or intangibles through electronic or digital means or that is responsible for issuing the invoices and collecting payment for the supply on behalf of the underlying suppliers. According to the guidelines, whoever makes a supply is obligated to register for VAT in Nigeria, charge VAT at the rate of 7.5% on its invoice and collect and remit it to the relevant tax authority in Nigeria.

According to paragraph 5.1. of the guidelines, any NRS making a supply through digital or electronic platforms is appointed a collector agent of the FIRS to charge, collect and remit VAT to the FIRS. A collector agent may not deduct input tax on supplies B2B. Since the issue of the guidelines, Amazon, Zoom, Facebook and Twitter have issued company VAT policies for supplies to Nigeria. For instance, Amazon Web Services EMEA SARL (AWS Europe), in issuing invoices to B2B and B2C customers in Nigeria, includes VAT at 7.5% for its web cloud services. AWS Europe customers are therefore obliged to pay the total amount on the invoice to AWS Europe, who will remit the VAT to FIRS. AWS Europe determines the tax address based on the tax reference number of the customer, billing address and customer contact address.

Facebook VAT policy for Nigerian customers obliges customers to pay the whole VAT to Facebook, as it is a collector of VAT. Where customers of B2B supplies are entitled to recover input VAT or are exempted from VAT, the customer may recover its VAT from the FIRS using its TIN (referred to as VAT ID by the Facebook VAT policy for Nigerian customers).

Conclusion

The FIRS may determine penalties and assess estimated VAT for non-resident electron­ic and digital service suppliers to B2B and B2C in Nigeria who fail to register, charge, collect and remit VAT to the FIRS. It is also worth mentioning that the guidelines are not applicable to the supply of goods electronically or digitally until January 2024. Also, the guidelines do not apply to professional and consultancy services that are not automat­ed but provided via the internet, broadcasting and telecommunication services.

Read the WTS Global VAT Newsletter here.