Guidelines on Simplified Compliance Regime for Value Added Tax (VAT) for Non-Resident Suppliers
The Finance Act (FA) 2020 introduced certain amendments to the Value Added Tax Act (VATA). Section 10 of the VATA requires that non-resident persons making a taxable supply of goods and services to Nigeria be registered for tax purposes and obtain a Tax Identification Number (TIN). Also, FIRS is required to issue guidelines to give effect to the provisions of Section 10 of the Act.
The Federal Inland Revenue Service (FIRS) recently issued an information circular (2020/19) dated 11 October 2021, to provide guidelines on the implementation of a Simplified compliance regime for Value Added Tax (VAT) for Non-Resident Suppliers (NRS). This circular replaces the earlier FIRS circular issued on 3 June 2021. The guidelines with respect to the supply of services in this circular shall come into effect 1 January 2022 and supply of goods shall come into effect 1st January 2024.
This guideline covers the following issues:
- Requirements for VAT registration under the regime
- Procedure for registration for VAT by NRS
- Supplies that are taxable in Nigeria
- Appointment of NRS as VAT Collection Agents
- Procedure for remittance of tax collected
- Procedure for deregistration
- General obligations of NRS under the Act
1. Requirements for VAT registration under the regime
NRS are required to register with FIRS for tax via a link on the FIRS website. Where the NRS is already registered for VAT in Nigeria, they are required to migrate to the Simplified Compliance Regime using the same link.
2. Procedure for registration for VAT by NRS
The NRS is required to register within 12 months before this guideline comes into effect or 12 months after it has made or expects to make a single or series of supplies of $25,000 or its equivalent in other currencies through digital means, or the supplies are consumed, delivered, or utilized in Nigeria. The registration is done by logging into the registration portal and providing the following information:
1. name of the business (including the trading name),
2. whether it is a primary Supplier, intermediary Supplier, or both,
3. nature of supplies,
4. name of contact person or agent responsible for dealing with the Service,
5. the registered address of the business and its contact person (if different from (iv) above)
6. telephone number of the contact person,
7. electronic address of the contact person (email address),
8. websites URL of the NRS through which its business is conducted in Nigeria,
9. tax identification number of the NRS in its jurisdiction of residence, if such a number is issued to the supplier to conduct business in the supplier’s jurisdiction
10. Nigerian Tax Identification (If already registered for VAT in Nigeria)
11. any other information the NRS may deem relevant
It is important to note that registration of an NRS does not constitute a taxable presence for income tax purposes except the NRS has a taxable presence.
3. Supplies that are Taxable in Nigeria
Intangibles or services delivered via electronic or digital means or similar networks, Online services such as online gaming, online stores, auction services, online betting services; online advertising services; online intermediation services; subscription-based social media platforms; Streaming, downloading, or access to digital content; E-Library; standardized online education, etc.
These supplies do not cover:
· Professional and consultancy services that are not automated but are delivered via the internet (e.g., via email)
- Broadcasting services
- Telecommunications services
· Services that are exempt from tax under the First Schedule to the Act.
International traded services and intangibles traded in Nigeria are taxable where –
· The services or intangibles are consumed or intended to be consumed in Nigeria,
· The service is rendered in Nigeria by a person physically present in Nigeria at the time of providing the service,
· The service is provided to and consumed by a person in Nigeria, irrespective of whether the services are paid for by a third party who is not a resident of Nigeria,
· The service is designed to be consumed or utilized in Nigeria,
· The supply is tied to an immovable property located in Nigeria,
· The supplies of services and intangibles relate to movable property located in Nigeria and are consumed in Nigeria,
· The exploitation of the right over an intangible or the utilization of the service is carried out, by a person, in Nigeria,
International traded goods are taxable in Nigeria where –
· All taxable goods supplied to persons in Nigeria, through electronic or digital means (e.g., marketplace, platform, app, portal, etc.) are liable to VAT in Nigeria under these guidelines.
· Goods are supplied to Nigeria and therefore taxable in Nigeria where the delivery address of the goods is in Nigeria
Goods evidenced to have been charged to VAT under these guidelines shall not be liable to VAT on entry into Nigeria. With respect to the goods being imported, VAT incurred under these guidelines shall be deducted from the total VAT liability computed at the port of entry.
4. Appointment of NRS as VAT Collection Agents
The service shall appoint NRS to collect VAT at the rate of 7.5% and remit to FIRS.
For the purpose of this guideline, Non-Resident Suppliers includes:
1. The person making the supply, where the supply is not made through intermediaries
2. The intermediary through which the supply was made to Nigeria, where the supply is facilitated through an intermediary(ies)
The supplier is required to register for VAT using its name, issue VAT invoices, deduct and remit VAT due on the supplies made to Nigeria through its platform using its TIN.
5. Procedure for remittance of tax collected
The NSR is required to issue a tax invoice and remit VAT using its name and TIN the amount due as follows:
1. Nigeria collecting Bank for Naira
2. Foreign currency (Dollar, Euro, and GBP) will be remitted through electronic payment method using a link to be provided by FIRS or through Bank transfer to the accounts provided by FIRS
The payment instructions should include the following:
1. The bank’s name and address
2. The bank’s code number
3. The value date
4. The account name (Beneficiary) and account number
5. The currency in which payment will be made
6. The IBAN (where applicable)
7. Name and address of the company; and
8. Tax type (i.e. VAT) and related period
VAT payment by NSR is to be made 21 days following the end of the month within which the supplies were made
Transactions in currency other than Naira, USD, GBP, and Euro should be converted to Naira, USD, GBP, and Euro using the CBN exchange rate and remitted to FIRS.
6. Procedure for deregistration
An NSR that does not meet the qualification for registration for three (3) consecutive years may communicate with the service its intention to be deregistered from the regime. The service may deregister the NSR after due verification that the NSR does not meet with pre-conditions for registration.
7. General obligations of NRS under the Act
Record Keeping and Retention – all NRS making supplies to Nigeria are required to keep reliable and verifiable records of supplies made to Nigeria and should be made available to the Service upon request. Information required to be kept should indicate:
- T ype of supply
- Date of the supply
- VAT payable
Such other information may be required to evidence that the tax for each supply has been charged and accounted for correctly.
Any information not included in the returns but required by the Service should be made available to the Service within 3 months of request and where any information requested by the Service and cannot be provided by the NRS due to legal or other domestic requirements of its country of residence, the NRS should notify the Service of such reason.
Filing of Returns – an NRS registered for VAT purposes will be required to file remotely, monthly VAT returns even for months where no taxable supply has been made to Nigeria via a link to be provided by FIRS or using the VAT Form 002NRS and forwarded to an email to be provided by the service and not later than 21 days after the end of the month in which the supplies were made.
The report to be submitted shall be in a prescribed template issued by the Service indicating:
- Supplier’s registration identification number
- Tax period
- Taxable amount
- Currency of payment
- Total tax paid or payable
- The name of the person from whom the tax was collected
- Such other information may be prescribed by the service.
Approval of a one-month extension of the due date for filing the VAT returns by the NRS shall be obtained from FIRS and must be granted before the due date.
Input VAT – an NRS shall not deduct input VAT but will remit the whole tax collected to FIRS as exports under the destination principle are zero-rated. Input VAT may be claimed in the origin of supply jurisdiction if the domestic VAT rules of that jurisdiction provide for input VAT deduction on exported goods and services.
Failure to Account for and Remit VAT – an NRS has failed to collect VAT if:
- It does not include the transaction in its returns
- The NRS has not charged VAT or collected the tax on the transaction
Where the NRS fails to account for or remit VAT and comply with this guideline, ar the service may:
- Take all necessary steps to recover the amount due and get restitution
- Use the Mutual Administrative Assistance in tax collection instrument, where applicable to collect the tax
- Do all such things as may be necessary for it to enforce the tax laws and to collect the taxes due.
Coordination Between Collection by NRS and Self-Charge – there are two categories of person’s required to collect and remit VAT in a cross-border supply of goods and services:
- Persons appointed by the service (NRS)
- A taxable person to whom the supply of taxable goods or services are made in Nigeria (Self-charge)
However, where the NRS fails, for any reason, to collect the tax, or is not required to collect the tax, the person to whom the goods or service is supplied shall withhold or self-account for the tax in line with section 10(3) and section 14(4) of the Act
Use of Third-Party Service Provider