Vat & Other Indirect Taxes
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
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