What is VAT?
Value Added Tax (VAT) is a tax imposed on the supply of goods and services. Under Nigerian law, the tax is charged at 7.5% of the value of the taxable goods and services.
An illustration of this is if you sell shoes for N10, 000, the VAT chargeable on that is 7.5% of the value – N750, the business is therefore supposed to sell the shoes to members of the public for N10, 750. The company retains N10, 000 and then remits the N750 to the FIRS.
Who needs to register for VAT?
Section 8 of the Value Added Tax Act which was amended by the Finance Act 2020, states that a taxable person shall upon commencement of business register with the FIRS and failure to register within the period specified is liable to pay a penalty of N50,000 for the first month, and N25,000 for each subsequent month. . However, certain goods and services are exempt, they include:
- All medical and pharmaceutical products
- Basic food items
- Books and educational materials
- Baby products
- Fertilizer, locally produced agricultural and veterinary medicine, farming machinery and farming transportation equipment
- All exports
- Plant and machinery imported for use in Export Processing zone or free trade zone
- Plant, machinery and equipment purchased for utilization of gas in downstream petroleum operations
- Tractors, ploughs and agricultural equipment and implements purchased for agricultural purpose
- Medical services
- Services rendered by community banks, people’s bank and mortgage institutions
- Plays and performances conducted by educational institutions as part of learning
How do you apply?
To apply for VAT, you will need to go to the Federal Inland Revenue Service (FIRS) office that is closest to your registered address. You can find the locations on the FIRS website with the following documents:
- Memorandum & Articles of Association
- Certificate of Incorporation: CAC2, CAC7
- Duly filled and officially stamped VAT form 001
- Utility bill
- Application letter on company letter headed paper
If your business is a registered business name, and not a limited liability company then the only documents which you will need to provide are:
- Business Name Registration Certificate
- Duly filled and officially stamped VAT form 001
- Utility bill
- Application letter on business letter headed paper
You should take the original copy and 2 photocopies of each document. The originals are required for sighting only, 1 copy will be left with the FIRS, and 1 copy will be stamped and signed by an FIRS official as evidence that you have made an application.
How much does it cost?
Registering for your VAT IS FREE.
You do not have to pay any fees to register for it, and you do not need to employ someone to apply on your behalf. However, most people decide to engage the services of 3rd parties to assist them.
How long does it take to get my VAT?
Ordinarily, VAT registration should be completed instantly or at most by the next day, however, it appears that a number of the FIRS offices are struggling with backlogs, and so it is not uncommon for the process to drag on for about a week or in some instances 2 weeks.
Remember payment of tax is a civic duty. If you are providing goods and services in Nigeria, which are not exempt, then you should register for VAT.
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We hope you have found this information helpful. Please note that this information is provided for general informational purposes only and is not intended to be legal advice. No lawyer-client relationship is formed nor should any such relationship be implied. It is not intended to substitute for the advice of a qualified lawyer. If you require legal advice, please consult with a qualified lawyer.