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Tag: Value Added Tax

  • Fed Govt earns N948.07b from VAT in Q3 2023

    Fed Govt earns N948.07b from VAT in Q3 2023

    The National Bureau of Statistics (NBS) said the aggregate Value Added Tax (VAT) stood at N948.07 billion in the third quarter (Q3) of this year.

    This is according to the VAT Q3 2023 Report released in Abuja yesterday.

    The report shows a growth rate of 21.34 per cent on a quarter-on-quarter basis from N781.35 billion in Q2 2023.

    It said local payments recorded were N522.08 billion, while foreign VAT payments contributed N204.58 billion, and import VAT contributed N221.41 billion in Q3 2023.

    The report said on a quarter-on-quarter basis, agriculture, forestry and fishing recorded the highest growth rate with 91.87 per cent.

    Read Also; Why buildings are demolished in Lagos, by Attorney-General

    “This was followed by activities of extraterritorial organisations and bodies with 80.25 per cent.

    “On the other hand, real estate had the lowest growth rate with –37.68 per cent followed by construction with – 9.54 per cent,” NBS said.

    In terms of sectoral contributions, the report showed the top three largest shares in Q3 2023 were manufacturing with 26.51 per cent, information and communication with 19.04 per cent, and financial and insurance activities with 12.31 per cent.

    “On the other hand, activities of households as employers, undifferentiated goods- and services-producing activities of households for own use recorded the least share with 0.02 per cent.

    “This was followed by water supply, sewerage, waste management, and remediation activities with 0.06 per cent.

    “This was closely followed by activities of extraterritorial organisations and bodies with 0.10 per cent,” the report added.

    The report, however, said on a year-on-year basis, VAT collections in Q3 2023 increased by 51.60 per cent from Q3 2022.

  • Obi hails Tinubu’s advice on VAT

    Vice Presidential candidate of the Peoples Democratic Party (PDP) Peter Obi has hailed National Leader of the All Progressives Congress (APC), Asiwaju Bola Tinubu, on his position on the proposed increment in Value Added Tax (VAT).

    Tinubu, last Thursday, advised the Federal Government against increasing VAT rate as being canvassed by the Minister of National Planning, Udoma Udo Udoma and the Executive Chairman of the Federal Inland Revenue Service, Mr. Babatunde Fowler.

    In a statement yesterday by his media office, Obi described Tinubu’s advice as gratifying and making economic sense given the situation in the country.

    According to him, Tinubu’s position was clearly at variance with that of his party, saying it goes to underscore the uncoordinated campaign the APC dished out to Nigerians.

    Obi, who said tax must be relaxed to act as incentive to local and foreign investors, insisted that the right way to shape up the economy in the face of mass unemployment is to have attractive economic policies to encourage entrepreneurs and investors.

    Read also:  VAT increase will raise misery index, says MAN

    According to him, the call for an increase in VAT or other taxes in the present economic situation amounted to insensitivity on the part of the government.

    He, however, noted that Tinubu’s advice was in tandem with the position of the PDP, stressing that tax reduction was one of the main electioneering campaign messages of the PDP presidential campaign.

    “It is extremely unrealistic for anybody to think of growing the economy and creating jobs by increasing tax. It’s too simplistic an approach,” Obi reiterated.

    The former vice presidential candidate enjoined Tinubu to also advise the All Progressives Congress (APC) to embrace restructuring, saying it is the only option left to move the country forward.

    “Anybody thinking this country will work without tinkering with the political and economic structure is deceiving himself because no nation grows on injustice,” he noted.

  • VAT increase will raise misery index, says MAN

    The Manufacturers Association of Nigeria (MAN) has  said any increase in the Value Added Tax (VAT) will be inappropriate.

    Its Director-General Mr. Segun Ajayi-Kadir told The Nation at the weekend that increasing VAT could send a wrong signal that the government was not sensitive to the plight of low and middle-income earners. An upward review of VAT is akin to the government taking back what was given, especially now that the N30, 000 minimum wage has been agreed on, he said.

    The government has denied planning to raise VAT from 5%.

    Ajayi-Kadir insisted that if VAT was increased, the economy will be in a more vulnerable state, as Nigeria’s misery index will go up. He also said given the lopsided income distribution pattern, low per capita income will be affected.

    The MAN chief’s view is that the burden of tax increase will be shifted to consumers who are already experiencing hard times due to low purchasing power. the inventory of unsold items has soared, he noted, reducing the profitability of manufacturing firms, with many factories shutting their operations.

    Ajayi-Kadir also said increasing VAT rate would worsen the already high unemployment rate, which is above 23 per cent.

    He said MAN, as a strategic stakeholder in the development agenda, appreciates the need for the government to generate more revenue to fund its developmental initiatives amidst declining revenue from oil.

    The MAN chief, however, said the government should be caution in the drive for improved revenue, considering that the economy has just exited a recession.

    He argued that the nation’s precarious macro-economic condition requires palliatives that would improve investment and not higher tax burden.

    According to Ajayi-Kadir, the prevailing high lending rate, double digit inflation, low per capita income, and high unemployment rate, among others, are already limiting the economy’s competitiveness.

  • Obi hails Tinubu’s advice on VAT

    The vice presidential candidate of the Peoples Democratic Party (PDP) in the February 23 presidential election, Mr Peter Obi has commended the national leader of the All Progressives Congress (APC), Asiwaju Bola Tinubu on his position on Value Added Tax (VAT).

    Tinubu had, in Abuja on Thursday, advised the Federal Government against increasing VAT rate, as being canvassed by the Minister of National Planning, Udoma Udo Udoma and the Executive Chairman of the Federal Inland Revenue Service, Mr. Babatunde Fowler.

    In a statement Sunday by his media office, Obi described Asiwaju Tinubu’s advice as gratifying and made a lot of economic sense given the situation in the country.

    According to the PDP chieftain, Tinubu’s position was clearly at variance with that of his party, saying it goes to underscore the uncoordinated campaign the APC dished out to Nigerians.

    Stating that tax must be relaxed to act as an incentive to local and foreign investors, Obi insisted that the right way to shape up the economy in the face of mass unemployment in the country is to have an attractive economic policy to encourage entrepreneurs and investors.

    REad also: APA Buhari: don’t forget your promise to run inclusive govt

    Obi said the call for increase in VAT or other taxes in the present economic situation amounted to insensitivity on the part of government to the plight of the populace.

    Mr Obi, however, said that Tinubu’s advice on VAT was in tandem with the position of the PDP, stressing that tax reduction was one of the main electioneering campaign messages of the PDP presidential campaign.

    “It’s extremely unrealistic for anybody to think of growing the economy of this country and creating jobs just by increasing tax. It’s too simplistic an approach”, Obi said.

    The former opposition vice presidential candidate enjoined Tinubu to also advise the APC to embrace restructuring, saying it’s the only option left to move the country forward.

    Obi said, “Anybody thinking that this country will work without tinkering with the political and economic structure is deceiving himself because no nation grows on injustice”.

    He described as unfortunate the fact that Nigeria with all her potential, is among the three African countries that Pew Research Center indicated that 45 percent of their adult population are desiring to leave the countries in search of greener pastures.

  • UPDATED: Tinubu to FG: increased VAT will put pressure on Nigerians

    National Leader of the All Progressives Congress (APC), Asiwaju Bola Ahmed Tinubu has advised federal government to jettison the proposed increase in the Value Added Tax (VAT).

    The proposal if implemented, he said, will put a further burden on the Nigerians, especially the masses.

    Tinubu also warned Nigeria must begin to look inward and initiate people- friendly policies based on the looming global economic recession.

    The former Lagos governor, who spoke at the 11th Bola Tinubu colloquium in Abuja, also asked the government to revisit privatisation of the power sector.

    This, he said, is necessary if Nigeria hopes to fast track industrial development and job creation.

    He also demanded an end to estimated billing in the country.

    According to him: “I want to appeal to Prof. Yemi Osinbajo, the Vice President and his team to put a huge question mark on any increase on VAT.

    “If you reduce the purchasing power of the people, we can further slowdown the economy.

    “Let us widen the tax net. Those who are not paying now, even if they are relatives of Bola Tinubu, let the net be bigger and we take in more taxes. That is what we must do in the country instead of another layer of taxes for now.”

    On needs to industrialise the country, Tinubu said: “We require serious and bold reforms to achieve this. What is happening to our gas pipelines?

    “Whatever we have to invest now for our future is a task that must be done boldly.

    Read Also: Tinubu icon of Nigeria’s contemporary politics, says Lalong

     

    “The PDP administration shared out generation, distribution and transmission to their friends and cronies without very deep and thoughtful research and evaluation.

    “It has now become pork chops. This privatisation must be revisited. Put experts together for a more constructive reform to improve generation, transmission and distribution by any means necessary. We cannot afford to be too legalistic about this.”

    He went on: “We should push to end the practice of billing people for electricity they never received.

    “This practice is a vestige of the past that should not accompany us into the future. A person should be charged accurately and only for the power that they use.

    “Government should continue to aggressively implement its national infrastructure plan.

    “We must commit ourselves to a national highway system linking our major cities and towns, our centres of commerce with each other. This will save lives, spur commerce, cut costs and bring Nigerians closer together.”

    The co-Chairman of the APC Presidential Campaign Council stressed the next level slogan of the party during its campaign was not just a jargon that should be discarded after victory has been won.

    He said: “The Next Level is not just a trendy campaign phrase to be quickly discarded once victory has been achieved.

    “It has a much deeper and more profound meaning, perhaps even more than its authors contemplated.

    “This is because we are a nation still in the process of defining itself politically and economically.

    “In this process, it is tempting and easy to borrow indiscriminately from those nations that seem to have mastered the art of democratic governance and to have achieved economic prosperity.

    “However, to achieve durable progress, we can’t afford to work hard but in mindless devotion to the ways of other nations.

    “This truth is particularly acute when these very nations now face fundamental political and economic questions that cast doubt on the social utility and viability of the economic model under which they have travelled for the past 50 years.”

     

  • Telcos: tariff hike inevitable…if

    Telecoms firms have warned of the inevitability of end-user tariff hike across their services should there be hike in Value Added Tax (VAT) as being proposed by the Federal Government.

    Acting under the aegis of Association of Licensed Telecoms Companies of Nigeria (ALTON) and Association of Telecoms Companies of Nigeria (ATCON), the carriers are unanimous on the inevitability of hike in tariff to reflect the new VAT rate that will be charged by the government.

    ATCON President Olushola Teniola said at five per cent, Nigeria has one of the lowest rates of VAT in the world and a budget deficit that cannot be continually sustained by government relying only on increasing its borrowing to fund the shortfall.

    He said without any measurable improvement in the diversification of the revenue base of the economy and the income resulting from the sale of oil (via oil receipts), it appears that the increase in recurring expenses in the form of public sector minimum wage bill has forced the government to push the burden of this increase back on the public that consume VAT-itemised products and services.

    “This means in the short term that prices where VAT applies will increase and impact consumer consumption of such items, with a tapering off in the medium term, and in the long-term wage bills across board will need to increase to take in the impact of further wage demands by other sectors that will readjust wage bills upwards to reflect the increase in living costs and standard of living (since a majority of VAT goods are related to imported products and services).

    “VAT applied to all voice and data communication-related services that are VATable will be subjected to an increase to reflect the new VAT charges imposed by government,” Teniola said in an email response to questions.

    His counterpart in ALTON, Gbenga Adebayo, agreed no less with Teniola, saying any like VAT rate would inevitably increase the cost of doing business across board.

    Read also: Mayor, business leaders to meet on tariff hike

    He said: “This will increase the overall cost of doing business and sadly consumers of telecommunications services, like all other sectors, will pay more to reflect the increase in the VAT rates. This development, however, won’t lead to increase in the base rates, but will result in increase in the end-user rates to reflect the upward review of VAT collection.

    “As you are aware, VATs are collected and remitted to the Federal Government; it is not part of colony income; it’s a collection on behalf of the Federal Government for goods and services, and that’s why it’s called VAT.’’

    Couldn’t the government have looked elsewhere to source for funds to pick the minimum wage bills? The telcos think so. According to them, the government should think about reducing the cost of governance rather than robbing Peter to pay Paul.

    Adebayo said: “Certainly yes, it’s like the old saying of robbing Peter to Pay Paul: it’s unfair to tax the consumers, some of who are not direct beneficiaries of minimum wage, and using it to pay government minimum wage. Private companies which are expected to comply with the national minimum wage will have an increase in their wage bills and they can’t fund it from other taxation. They have to lower their costs or have to increase their product/goods/services prices to accommodate the minimum wage.

    “In my view, the entire economy will suffer any increase in VAT.  And this should be handled very carefully. Mere conversation around it is causing jitters in the economy and I advise all stakeholders to discuss and handle these issues very carefully. Most importantly, government should reduce its own cost of governance to accommodate any wage increase.”

    Teniola said it is a delicate balance of spreading the burden across board. “This is a delicate balance of applying the burden across board or deliberately targeting a specific segment of the population/society. In my opinion it is common for government to take the least course of resistance and in this case other alternatives, such as cost savings and efficiencies within federal, state and local government level to pay for this increase would not have the political support, simply due to the number of public sector workers that will have to be laid off to afford this minimum wage increase,” he said.

  • Govt mulls VAT increase

    NIGERIANS were yesterday told to brace for a possible increase in the Value Added Tax (VAT).

    VAT, now five per cent, is undergoing review, after which it may attract between 35 and 50 per cent increase, it was learnt.

    The Executive Chairman of the Federal Inland Revenue Service (FIRS), Babatunde Fowler, broke the news yesterday.

    He told the Senate Committee on Finance on the Medium Term Expenditure and Fiscal Strategy Framework (MTEF) that the need to increase VAT was informed by the necessity to raise more revenue for the government to meet its obligations.

    “Nigerians should be ready for increase in VAT before the end of the year. VAT is higher in other countries, including Ghana and many others. There should be increase in rate but not immediately,” Fowler said.

    Noting that VAT collection rose by about 20 per cent last year, the FIRS boss, however, said that many companies collect VAT without remitting same to government coffers.

    Fowler told the committee that the government’s revenue projection from taxes for the 2019 fiscal year is N8 trillion, out of which N3 trillion is expected from VAT.

    The country’s chief tax officer put tax revenue for 2018 at N5.3 trillion; N4.03 trillion in 2017; and N3.31 trillion in 2016.

    The FIRS raked in N5.3 trillion  last year.

    Fowler said: “By the end of this year, we should be ready for increase in VAT. A lot of Nigerians travel to Ghana and other West African countries and they can see that theirs is much higher. And they pay when they go for those trips. We should be ready for an increase on VAT.

    “I can certainly see an increase in VAT of at least 35 percent to 50 per cent this year based on our enforcement activities. There certainly will be an increase in Company Income Tax (CIT) and also on Petroleum Profit Tax (PPT).”

    On the new minimum wage, Budget & National Planning Minister Udo Udoma said: “Let me speak on the issue of the minimum wage.

    But financial experts have cautioned the government so that the reason for raising the VAT will not be counter productive.

    To a former Executive Director at Keystone Bank, Richard Obire, raising VAT was not the problem but the application of its proceeds.

    He said raising VAT just to pay salary will not add any value to the economy, arguing that the people are better managers of funds than the government.

    According to Obire, VAT should be exempted on products that affect the poor as it will make them poorer and worsen their economic conditions with increased prices of goods and services.

    Chief Operating Officer, GTI Capital, Kehinde Hassan said: “The proposal to increase VAT may be equated to a counterproductive move. The just approved N30,000 minimum wage is a far cry from a standard remuneration package that can guarantee minimum standard of living in Nigeria. Increasing VAT rate to enhance non-oil revenue generation is synonymous to spicing a favourite delicacy with digestive pills.

    The Chief Executive Officer, Sofunix Investment and Communication, Sola Oni said: “The N30,000 minimum wage has been endorsed by the senate after protracted argument between the organized labour and the federal government . However, the proposed plan by the FIRS to increase Value Added Tax (VAT) is like carrot and stick. There is no doubt that VAT is more transparent to charge and it reduces tax evasion.”

    According to him, “it is an indirect way of taxing the new minimum wage in real term. Workers are consumers of products and services. Hence, part of their new minimum wage shall go for VAT.”

  • Why VAT revenue is poor in Nigeria- Experts

    Unlike most advanced and developing countries, where the bulk of tax receipts are generated from collection of Value-Added Tax (VAT) the reverse is the case in Nigeria, where the tax-to-GDP ratio is poor. In this report, Ibrahim Apekhade Yusuf examines the issues

    With over 35 million taxpayers currently in the nation’s tax net, revenue generation through taxes may have risen significantly. But the irony, however, is that the receipts from collection of Value-Added Tax (VAT) still leaves nothing to cheer about as it contributes a paltry one per cent to the nation’s Gross Domestic Product (GDP).

    What VAT is all about?

    According to the Federal Inland Revenue Service (FIRS), VAT is governed by Value Added Tax Act Cap V1, LFN 2004 (as amended). VAT is a consumption tax paid when goods are purchased and services rendered. It is a multi-stage tax borne by the final consumer. All goods and services (produced within or imported into the country) are taxable except those specifically exempted by the VAT Act. VAT is charged at a rate of 5%.

    A view of the VAT ecosystem

    The National Bureau of Statistics, NBS, had last year released the sectoral report for Value Added Tax for the 2017 fiscal period, stating that the country generated a total of N972.34bn from VAT.

    An analysis of the VAT report showed that the amount was collected from 28 sectoral activities during the period under review.

    A breakdown of the amount showed that the sum of N204.77bn was generated in the first quarter while the second, third and fourth quarters recorded N246.3bn, N250.56bn and N254.1bn, respectively.

    In the report signed by the Statistician General of the Federation and Chief Executive, NBS, Dr. Yemi Kale, the bureau said the manufacturing sector generated the highest amount of VAT revenue at N119bn.

    This was closely followed by the professional services sector with N87bn.

    The report read in part, “Sectoral distribution of VAT data for Q4 reflected that the sum of N254.1bn was generated as VAT in Q4 as against N250.56bn in Q3 and N207.35bn in Q4 2016, representing 1.41 per cent increase quarter-on-quarter and 22.55 per cent increase year-on-year.

    “Out of the total amount generated in Q4 2017, N121.09bn was generated as non-import VAT locally, while N79.44bn was generated as non-import VAT for foreign. The balance of N53.57bn was generated as Nigeria Customs Service import VAT.”

    It is, however, instructive to note that 55 per cent of the revenue generated from VAT receipts was being collected from Lagos State while the balance of 45 per cent is being generated from the remaining 35 states of the federation and the Federal Capital Territory.

    Rivers, Kano and Kaduna account for six per cent, five per cent and one per cent of VAT collection, respectively.

    A peep into Africa

    According to new data from Revenue Statistics in Africa released in Addis Ababa at a meeting of tax and finance officials from 21 African countries hosted by the Department of Economic Affairs of the African Union Commission (AUC), the average tax-to-GDP ratio for the 16 countries covered in this second edition of the report was 19.1% in 2015, an increase of 0.4 percentage points compared to 2014. Every country has experienced an increase in its tax-to-GDP ratio compared to 2000, with an average rise of five percentage points.

    Making a case paradigm shift in VAT administration

    It is the considered view of many that the nation’s tax ecosystem, especially the VAT, needs to be changed to achieve the greater good for all.

    One of those who share the view and very strongly too that there is need to shake things up in the VAT space is Omooba Olumuyiwa Sosanya, a renowned accountant.

    Speaking in an interview with our correspondent, Sosanya, founding president, Association of National Accountants of Nigeria (ANAN), said at the centre of the issue of dwindling VAT receipts is the problem of inefficiency in the administration of the VAT.

    According to him, “The problem is overcentralisation of the administration. VAT is a federal government tax controlled by Federal Inland Revenue Service (FIRS). It is this overcentralisation that leads to inefficiency in the administration.”

    Way forward

    In the view of Sosanya, “We should decentralise it and allow the state to administer the VAT. As of now, all the state administers what we call Personal Income Tax. What is being generated on this compare to what could be generated if the states are allowed to collect the VAT is huge.” Pressed further, he said, “Take Lagos State for instance, the total amount of money that is being generated on VAT is over 55 per cent. The FIRS doesn’t have any avenue of determining the genuine turnover from VAT. The Service is overwhelmed in the administration of VAT. Whereas if you allow the state to administer the VAT which is decentralised, each of the state will have time to update their staff to register the chargeable person.”

    Most of the accountants, engineers, and consultant companies, he stressed, “Are not collecting VAT. And from my own estimation, about 70-75 per cent are outside the VAT and that’s what brought us to this mess. There is no way we should not be collecting over 800 billion naira monthly. And when this is done, I’m not saying the rate of VAT should be increased because a lot of people have been agitating for that. If we do that, what we get is that the revenue for FIRS will be less because the people will now understand their taking. However, if we expand on it, it will bring more chargeable persons and businesses and that will generate up to N800 billion to N1trillion in a month. Some people will argue that the Ghana VAT is about 20 per cent. This is because the total of Ghana VAT is decentralised. Even if you’re a barbing saloon you’re captured, restaurants are captured, all private sector in Ghana is captured, the same thing obtains in South Africa. The rate of VAT is less in Nigeria and look at the population of Ghana and South Africa, they are about 200 million, so we are supposed to generate more.”

    In the view of a tax expert, Bamidele Samson, some of the obstacles hampering the growth of VAT are the problem of inadequate personnel to drive the revenue mobilisation in that space, non-compliance of business owners, lack of transparency, evasion of VAT-able goods and services.

    VAT increase likely soon

    Nigeria is working on modalities to increase VAT on some items which include carbonated drinks and other luxury items in 2019.

    Giving insight on the planned VAT rate, Finance Minister, Hajia Zainab Ahmed, says the increase will help the government in providing infrastructure for its people.

    The minister stated this recently at the inauguration of the Strategic Revenue Growth Initiative in Abuja.

    Writing in her twitter handle, @ZShamsuna, the minister said, “Revenue enhancement has become a critical challenge in terms of the need to mobilise fiscal resources to deliver on our socio-economic development targets as in the ERGP & @NGRPresident has mandated us to generate more revenues, whilst proactively monitoring collections.

    “Given the current fiscal terrain & revenue outturn performance – with the realisation of our budgeted revenue at about 50% as at Q3 2018, we have quite a distance to transverse to achieve the ERGP’s target of a tax to GDP ratio of about 15%.”

    It is, however, not the first time the federal government will raise duties on luxury goods. In December 2016, the government raised duties on luxury goods and beverages imported into the country under the Economic Community of West Africa’s (ECOWAS) Common External Tariff (CET) regime.

  • VAT proceeds drop N3.58bn in Q1 2018

    Earnings from Value Added Tax (VAT) generated by the federal government through the Nigeria Customs Service (NSC) on imported items dropped by N3.58 billion in the first quarter of 2018, the National Bureau of Statistics (NBS) stated in a recent data.

    According to a release by the NBS tagged, ‘Sectorial Distribution of Value Added Tax’ on its website at the weekend, the VAT on imports, which was N53.57bn in Q4 2017, reduced by 7.73 per cent to N50bn.

    But, when compared to the amount generated in Q1 2017, it rose by 6.68 per cent from N46.41bn.

    The federal government had announced its plan to commence the implementation of the 2017 Revised Import and Export Guidelines which mandates both imports and exports to being palletised in containers in January 1, 2018.

    This, according to Finance Minister Kemi Adeosun, is in line with global standards and part of the government’s policies to enhance the ease of doing business in the country.

    However, the total amount generated through VAT increased to N269.79 billion naira in Q1 2018 as against N254.10 billion generated in previous quarter and N221.38 billion in the period in 2017.

    The amount, according to NBS, represents 6.17 per cent increase on Quarter-to-Quarter (QoQ) basis and 21.87 per cent increase on Year-on-Year (YoY) basis.

    Other Manufacturing, Professional Services, Commercial and Trading, States Ministries and Parastatals and Breweries, Bottling and Beverages in the local non-import VAT generated the highest amount of VAT of N30.14bn, N16.58bn, N14.94bn, N11.88bn and N8.88bn respectively.

    On the other hand, Minning, Pharmaceuticals, Soaps and Toiletries, Textile and Garment Industry, Publishing, Printing, Paper Packaging and Agricultural and Plantations also in the local non-import VAT recorded the least amount of VAT of N46.25m, N243.44m, N285.43m, N339.61m and N372.57m respectively.

    The foreign non-import VAT rose by 23.87 per cent QoQ and 103.60 per cent YoY to N98.40bn.

  • Refund procedure for Value Added Tax (VAT)

    Refund procedure for Value Added Tax (VAT)

    A salient feature of the VAT system is its ability and promptness in making refunds as and when due. Refund here does not necessarily mean direct cash payment as further explained in paragraph 4 below. The Value Added Tax Act Cap V1 LFN 2004 (as amended) permits a taxable person to claim refund of the excess tax, in the event of input tax exceeding output tax. Refund is also available for VAT paid on zero-rated goods and services. The FIRS is empowered to set the guidelines and requirements for VAT refund from time to time.

     

    The right to claim VAT refund

    It is the right of the VATable person to demand for a VAT refund where the input tax genuinely exceeds the output tax for a transaction period. VATable persons by their roles are agents of the FIRS in the administration of VAT and the FIRS is obliged to make timely refund to them in the course of their agency roles.

     

    How to apply for VAT refund.

    The VATable person must first fill the VAT return form 002, duly completed and submitted to the relevant tax office and the form must clearly and correctly indicate that it is excess of input tax over output tax, to warrant any refund.

     

    Nature of Refund.

    VAT refund can be claimed in any of these ways;

    i.) by credit method, or

    ii.) by direct cash refund method; or

    iii.) by both methods in (i) & (ii) above.

     

    Credit method

    This is carried out with the use of VAT form 002, which contains the calculation of total output tax and input tax and deduction thereof. Where output tax equals input tax, no tax is payable or refundable and where output tax exceeds input tax, the tax difference is remittable to government.

    Where the output tax is less than the input tax, the excess of input tax must be refunded. Here, the taxable person may decide to set off the balance resulting in his favor against the output tax in subsequent month by making the outstanding input tax in the previous month as the first charge in the current month output tax. This is a popular VAT refund approach in many VAT system and is encouraged by the FIRS since it saves time and unnecessary paperwork.

     

    Direct Cash method

    It is reasonable to expect that output tax will always exceed input tax. However, There are some companies whose input tax are perpetually in excess of output tax, such a company cannot reasonably be persuaded to engage in future set –off by means of credit because the need for refund is repetitive and could be so for an extended period. It is for this category of companies that regular cash refund may be necessary.

     

    Who is qualified for refund?

    Refund may be demanded by a registered vatable person in respect of its excess input tax. It follows that only registered vatable person can make refund claim.

     

    How soon can refund be obtained?

    Normally, all relevant document for VAT transaction will be verified before a refund can be made. The Service shall decide on who is eligible for refund subject to its refund rules and conditions. The refund shall be made within 90 days of the decision of the Service on the eligibility for the refund. The earlier the underlying documents are available for VAT audit, the quicker the refund process.

     

    Document verification

    All evidences of payments in respect of input tax must be kept for verification purpose before a refund can be made, while all source documents relating to the transaction in refund application must be kept and made available for inspection. The following document shall be produced for VAT audit:

    • related monthly VAT return form 002, input tax invoices, sales invoices, notices of import and original proof of tax payment on imports;
    • export documents, notices of export and proof of realization of export; and
    • other relevant document needed to back up refund claim.

     

    Refund procedure

    All claims for refund, irrespective of the mode of refund, must be subjected to verification by the VAT auditor. It is therefore important to stress that all tax invoices are to be scrupulously kept for at least a full year before they are stored away. Unless a vatable person indicates in writing his preference for direct cash refund, the FIRS will safely presume a refund by the credit approach.

    The VAT auditor’ report of findings is the acid test in processing any VAT refund through the FIRS internal processing channels.

     

    Refund Account

    In order to minimize delays in the refund process, especially for direct cash, a dedicated account has been opened by the Accountant-General of the Federation from which payment of all successful refund are to be made to applicants.

     

    Refund Offence

    Stiff penalties are provided in the law for offences that may be committed in the course of requesting for refund. Examples of such offences include among others:

    • Using false documents to make refund claim;
    • Issuing false tax invoice, with the intention to procure unmerited refund;
    • Resisting VAT auditor from the verification exercise or supplying false or misleading information.