Vat & Other Indirect Taxes

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Nigeria
Introduction
Value Added Tax (VAT) was introduced in Nigeria in 1993 but became effective on 1 January 1994. VAT replaced the Sales Tax. VAT is governed by the Value Added Tax Act, Chapter V1, Laws of the Federation of Nigeria (LFN) 2004. The tax is administered by the Federal Inland Revenue Service (FIRS). Rates and scope

Rates
The standard VAT rate on goods and services is 5%. Value for VAT purposes includes customs duties, taxes, commission, transport, insurance and other charges, where applicable. Other than the standard-rated goods and services, some goods and services have been classified as VAT exempt, while others are zero-rated. Scope

The standard rate applies to all goods imported, supplied or manufactured in Nigeria. The scope of VAT in Nigeria is broad and applies to almost all transactions. VAT, which is based on general consumption, is applicable to the supply of all goods and services made (i.e. consumed) in Nigeria, except where the supply is specifically exempted or zero-rated. VAT is applicable in all Nigerian states, including the Federal Capital Territory, the territorial waters and the continental shelf of Nigeria. For VAT purposes, the Export Processing Zones (EPZ) or Free Trade Zones (FTZ) are not treated as part of Nigeria. VAT is therefore not payable on the importation of any goods or services into an EPZ or a FTZ. In addition, plant and machinery imported for use in the EPZ or FTZ are exempt, provided that 100% of the production of such a company is for export; otherwise, the tax shall accrue proportionally on the item. VAT registration

Compulsory registration
All resident and non-resident companies doing business in Nigeria are required to apply for registration with the FIRS immediately on commencement of business. There is currently no registration threshold. The tax authorities will allocate a VAT identification number to every registered person, which number must be stated on all invoices issued by the registered person. Such invoices are referred to as tax invoices. A non-resident company doing business in Nigeria is required to register for VAT using the address of the person with whom it has a subsisting contract as its address for purposes of correspondence relating to VAT. Where a registered person changes his name or trading name or the address of any of his business, he must immediately notify the FIRS in writing, and all existing registration documents should be returned to the tax authorities for amendment or re-issue. Group or branch registration

There is no longer a requirement for each branch of a company to register separately. The FIRS now permits taxpayers to register centrally where their administrative or head offices are located. There is no group registration in Nigeria, each legal entity must register in its name. Application for registration

Businesses must register with the tax authorities using VAT Form 001, immediately on commencement of business. Upon registration, the business will be issued a ‘Certificate of Registration’ and a VAT identification number. The number serves as an authority to charge and collect VAT on behalf of the FIRS. Deregistration

The tax authorities must be notified in writing of the winding up or cessation of a business. There are no specific provisions for VAT deregistration in Nigeria. Output tax
Prices of Goods and Services
Advertised prices for taxable goods and services are deemed to be inclusive of VAT. Where prices are not inclusive of VAT, this should be clearly stated. When invoicing, VAT must be clearly stated, where applicable. Calculation of output tax

Output VAT is calculated at the standard rate of 5% on the total sales value of the goods or services supplied. Output tax is due when a taxable supply is made or in certain other circumstances, such as: •forced sales of goods in satisfaction of a debt;

certain activities in relation to the cessation of a business; and •withdrawal of goods for private...
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