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  • VALUE ADDED TAX ACT

Description

Type : Sell
Date : March 2, 2017
Location : Nigeria

This was introduced by the VAT decree No. 2 of 1993, to replace the old sales tax. It is a consumption tax levied at each stage of the consumption chain, and is borne by the final consumer. It requires a taxable person upon registering with the Federal Board of Inland Revenue to charge and collect VAT at a flat rate of 5% of all invoiced amounts of taxable goods and services. 

VAT paid by a business on purchases is known as input tax, which is recovered from VAT charged on company‚Äôs sales, known as output tax. If output exceeds input in any particular month the excess is remitted to the Federal Inland Revenue Service (FIRS) but where input exceeds output the taxpayer is entitled to a refund of the excess from FBIR though in practice this is not always possible. 

A Taxpayer however has the option of recovering excess input from excess output of a subsequent period. It should be stated at this point that recoverable input is limited to VAT on goods imported directly for resale and goods that form the stock-in-trade used for the direct production of any new product on which the output VAT is charged. Learn more about Value Added Tax (VAT). 

 

Applicable tax law- Value Added Tax Act. Persons subject to the Value Added Tax: 

Any individual, corporation sole, group, body corporate or organization that consumes buys, procures or imports taxable goods or services is liable to pay the tax. How to pay the Value Added Tax 

 

During direct sales or open market transactions, the buyer or consumer shall pay the tax to the seller together with the cost of the goods or services bought. The seller then nets off the VAT paid at the time of purchase of the stocks sold from the VAT collected on the stocks sold and credit the balance to FIRS. 

Where the goods or services were supplied to a government Ministry, Department or Agency (MDA) or a company engaged in oil operations, the VAT payable by the MDA or oil company is deducted or withheld at source (at the point of payment). It is then credited directly to FIRS on behalf of the supplier 

VAT payments are made on a monthly basis not later than 21days of every subsequent month. Tax payers prepare and submit monthly VAT returns accompanied by evidence of payment of the tax due at designated banks 

 

Where to pay the Value Added Tax 

VAT remittances may be made at any designated bank, an e-ticket is immediately issued as evidence of payment. This e-ticket may be presented at the ITO and an e-receipt will be issued the taxpayer.


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