Vat which to some extent throw light on some of the provisions. This page provides nigeria sales tax rate actual values, historical data, forecast, chart, statistics, economic calendar and news. Recent amendments to the vat act were in 2007 and 2012 respectively. K, value added tax the facts of a positive tax in nigeria, lagos. Value added tax in nigeria vat all you need to know. A survey of vatable nigerian organizations, firs staff and the publics was conducted to gain insights into. V1 lfn 2004 as updated to may 2007 that requires all companies to file returns in prescribed forms. Vat is basically a consumption tax levied at a flat rate of 5%. Enter on line 35, the result of multiplying line 25 by 0. It is derived by multiplying the value of the aggregate supply by the tax rate, while input vat is what. This act may be cited as the value added tax amendment act, 2007.
It is a federal tax which is managed by the federal inland revenue service firs. On february 1st, 2020, the nigerian businesses setoff the implementation of the 7. An illustration of this is if you sell shoes for n10, 000, the vat chargeable on that is 7. Vat is a form of indirect tax and is levied in more than 180 countries around the world. The target of vat is consumption of goods and services and unless an item is specifically exempted by law, the consumer is liable to the tax. In january, 1993, the then government agreed to introduce vat by the middle of the year. Upon receiving the payment of n100,000 and tax credit note of n5,000, jideowo ltd will remit a sum of n5,000 to the federal inland revenue as value added tax on the transaction. This consumption tax was introduced to nigeria in the value added tax act of 1993. The tax is normally to be deducted at source when a payment is to be made to the beneficiary. Value added tax in nigeria top law firm in nigeria. Nigeria as a nation with federal political structure has a fiscal regime that adheres strictly to the same principle, a fact which. Vat and its contribution to revenue generation in nigeria. Value added tax vat the official portal of the uae.
Vat was proposed and a committee was set up to carry out. The value added tax vat in nigeria is tax payable on goods and services consumed by any person, whether government agencies, business organization or individuals. Value added tax in nigeria how to calculate vatable. As at today, it is regulated by the federal inland revenue service. A permanent vat registration number is then issued to the tax payer. It also relates to section 25c of companies income tax act cita cap.
Records and account have to be kept on all business. Value added tax vat and inflation in nigeria 1990 to 2003. Value added tax vat in nigeria is a consumption tax that was established. Secretary means the secretary to the zonal value added tax tribunal designated under section 7, schedule 2 to the value added tax act. Vat currently contributes a significant percentage of nigerias revenue from taxes as.
The vat system in nigeria is administered by the federal inland revenue service firs. I certify, in accordance with section 2 1 of the acts authentication act, cap. The net vat in a tax period is the amount to be remitted to the firs. Output vat is the vat that is due on vatable supplies. The value added tax vat administration in nigeria and the.
Inland revenue service annual reports, nigerian tax news, value added tax. The withholding tax rates in nigeria wht varies among individuals and companies corporate bodies. Vat has a directorate within the frame work of the federal inland revenue services firs with the head office in abuja. Three research questions were formulated for the study. Value added tax vat in nigeria is a federal government tax, which is administered using the existing machinery of the federal inland revenue services firs. It can also be said to be tax on spending or consumption levied at every stage of transaction but eventually borne by the final consumer of such goods and services. Value added tax vat is a tax imposed on the supply of goods and services. An evaluation of value added tax in nigeria myschooltrick. Value added tax vat value added tax or vat is a tax on the consumption or use of goods and services levied at each point of sale.
At the center of the collectible indirect tax is value added tax vat. Goods are taxable when delivered in nigeria while exported goods and services performed in nigeria for nonresident entities are. The value added tax act originally consisted o f 42 sections and three schedules. In contrast, value added tax is a separate type of tax. Capital gains tax 10% imposed on capital gains derived from sales or disposal of chargeable assets. Liability to vat arises when the output vat is more than the input vat. The study period spans economic cycles for about 66 percent of the life of the country, since attaining political independence in 1960. One of the attempts to expand the tax net with minimum resistance and also to reduce tax evasion so that most of the tax income would get to the nigerian government is the introduction of value added tax in nigeria in 1993. The objective of this study is to determine the extent to which value added tax has affected the nigerian economy. Value added tax act laws of the federation of nigeria. Nasiru ibrahim arab, clerk to the national assembly.
A personal income tax is a tax imposed on individuals or. Nonresident companies providing professional, consultancy, management and technical pcmt services to nigeria residents will be subject to tax at 10% final tax where such company has a significant economic presence to be determined by the minister of finance in nigeria. Administration of the tax 1 the tax shall be administered and managed by the federal board of lnland revenue in this act referred to as the board. Businesses collect and account for the tax on behalf of the government. Enter on line 110 the total input tax claimable on internet purchases for resale or production total output tax.
Nigeria is a member of the economic community of west african states member trading bloc, which may affect international vat collection and regulations. Circulars or information notices are not legal documents and are merely. Value added tax or just vat is a taxation scheme used by many companies, however, not all of them know how to calculate it. Value added tax vat was introduced by the federal government of nigeria and is provided for by the value added tax decree 102 of 1993 which became effective in 1994 which requires manufacturers, wholesalers, importers and suppliers of vatable goods and services to be registered within six months of commencement of business. This paper examined tax reforms in nigeria with respect to value added tax vat. The vat act, cap v1, laws of the federation of nigeria, 2007 as amended provides the legal basis for the imposition of vat on supply of all goods and services in nigeria except those specifically exempted. Value added tax vat in nigeria is a consumption tax that was instated by the value added tax act of 1993. These also vary amongst either the individuals or companies involved. Value added tax and economic development in nigeria. It is collected on behalf of the government by business and organizations.
An act to impose and charge value added tax on certain goods and. It was introduced into the nigeria tax system through vat decree no 102 of 1993 which repealed the sales act of 1986 and it became effective 1 january 1994. Pdf nigerian value added tax system and the concept of basic. The pay now, argue later rule in terms of section 36 of the valueadded tax act prima facie infringes on a taxpayers right of access to the courts as.
Nigerian value added tax system and the concept of basic food article pdf available in ssrn electronic journal january 2016 with 7,575 reads how we measure reads. Vat is charged on most goods and services provides in nigeria and also on goods imported into nigeria. Value added tax was introduced in nigeria after two years of preparatory work. Pdf nigerian value added tax system and the concept of. Current issues on value added tax vat law and practice. Value added tax vat asian journal of humanities and social. Value added tax and economic growth michael and ben 2007 explore the causes and consequences of the spread of value added tax vat. Value added tax vat is an indirect tax based on the consumption of some specified goods and services. As such, it is required to register for cit and file its tax returns. Value added tax vat a tax on spending, was started in january 1994 and replaced the former sales tax imposed on luxury of goods in nigeria.
In most cases, however, the withholding tax rates for individuals is anythin g from 5 percent to 10 percent while for companies, it is between 2. The personal income tax pit is the most common tax type in the country. The valueadded tax vat is administered by the federal inland revenue service firs in abuja. Nigeria s general vat rate is 5%, with other rates including 0% that can apply to certain transactions.
Vat is a consumption tax payable on the goods and service consumed by any person whether government agencies, business organizations or individuals. Board on production of such documents as the board may, from time to time. The firs will be shown the wht credit note of n5,000 which can be used to setoff future company income taxes. Only a limited number of supplies are nilrated, meaning any vat suffered may be recredited to the tax payer. Pdf the most difficult thing to understand may be income tax, this paper. C 21 lfn 2004 as updated to may 2007 and section 15 of value added tax act vata cap. Vat was proposed and a committee was set up to carry out feasibility studies on its implementation. The reform as also proved to be very successful since the federal government of nigeria has decided to give legal backing to the implementation of vat, the federal government established the value added tax vat, the federal government established the value added tax decree 1993. Stamp duties imposed on instruments executed by individuals and corporate. What you need to know about value added tax vat in nigeria. Value added tax was imposed on nigeria by virtue of the decree.
Value added tax vat is a tax on spending and it is borne by the final consumer of vatable goods and services, because it is included in the price paid value added tax known as vat for short is one of the types of taxes in nigeria, under the indirect tax category it replaces sales tax, which was characterized by a lot of lapses, inadequacies and restrictive coverage. The choice of the study period provides an opportunity for. They are neither binding on nor create estoppel against the firs. The study investigated the role of tax administration in revenue generation in nigeria between 1994 and 2015. This study analyses the relevance and the problems of value added tax vat in nigeria. As a vatable person, estate surveyor and valuer is required to keep proper records and books of all transactions, operations, importance and activities sufficient. Ex post facto research design was adopted for this study. The introduction of vat in nigeria through decree 102 of 1993 marks the phasing out for the sales tax decree no. Any person or individual, corporate sole, organizations who consumes or buys any taxable product or service will have to pay a tax levy known as value added tax vat in nigeria. Enter on line 110 the total input tax claimable on internet purchases for. Value added tax imposed on the net sales value of nonexempt, qualifying goods and services in nigeria, it is 5% of the value.
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