The VAT Act was one of the seven principal tax statutes amended by the Finance Act 2019. This Act came into force on 13 January 2020 and some of the significant changes made to the VAT Act include the following:
Based on the foregoing, the FIRS issued an Information Circular dated 29 April 2020, providing clarifications and guidance on the procedure for the implementation of the VAT provisions of the Finance Act.
As regards non-resident companies, the Circular clarifies the provisions of the VAT Act. Worth mentioning is the provision that covers non-resident supplies: a non-resident person making taxable supplies to a person in Nigeria or to a Nigerian resident is required to register for VAT with the FIRS, using the address of the person to whom it is making the supply as its Nigerian address for the purposes of correspondence relating to the tax.
The non-resident entity is required to include VAT on its invoice for the supply of goods or services and the entity receiving the supply in Nigeria is required to withhold and remit the VAT due on the invoice to the FIRS in the currency of the transaction. According to the Circular, a non-resident company which has a fixed base or Permanent Establishment (“PE”) in Nigeria is required to comply with registration, charging, filing, payment and other requirements as if it were a Nigerian company. Thus, said company must register using the address of its place of business in Nigeria (fixed base or PE), issue a VAT invoice, file returns, remit the tax and undergo tax assessments in accordance with the provisions of the VAT Act.
On 3 February 2020, the Value Added Tax (Modification Order), 2020 (“VAT Modification Order”) was issued.
Under the VAT Modification Order, the provisions of the VAT Act were expanded by extending the list of goods and services designated as exempted from VAT. The VAT Modification Order is the response to the current economic situation expanding the number of VAT exempt items to include products used by a vast number of Nigerians across all sectors, e.g.: basic food items (agro- and aqua-based staple foods), medical and pharmaceutical products, petroleum products as well as renewable energy equipment (solar- or wind-powered generators).
From the sweeping changes introduced by the Finance Act 2019 on the provisions of the VAT Act and further clarifications of these provisions by the FIRS, to the VAT Modification Order issued by the Minister of Finance, it is correct to say that, at present, VAT-related legislation is being made that has the capacity to boost the economy by stimulating the growth of small- and medium-sized enterprises in Nigeria whilst, at the same time, generating revenue for the government.
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