THE TAXAIDER NEWSLETTER VOL 3, ISSUE 11 (November 2021)

First Thought: The Art of Minimalism

In a world that seems to be constantly increasing in complexity, it is comforting to imagine that happiness relies on simplicity. Minimalism is the art of knowing how much you need and then showing gratitude for just that.

Minimalism is centred around removing unnecessary elements from your life. The idea is to move every part of your life to its most efficient form and remove all but the core essentials. You wind up with less clutter, fewer expenses, less stress, and less worry for more money in your pocket and more time on your hands.

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VAT (Modification) Order: What You Need to Know

VAT (Modification) Order of 2021 which was signed in September 2021 was issued by The Minister of Finance, Budget, and National Planning in October with a commencement date of 30th July 2021. The Order modifies and expands the list of exempted goods and services in the First Schedule to the Value Added Tax (VAT) Act and provides clarification on the exempted items already listed in the Value Added Tax (VAT) Act.

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TAX IMPLICATION OF FREE TRADE ZONE TRANSACTIONS

Nigeria as a country is always looking for ways to increase foreign and local investments, businesses, and participation in the country and one way of doing this is the establishment of Free Trade Zones. This is not alien to only Nigeria but other countries like Tanzania, Libya, Liberia, Egypt, Mauritius, China Hong Kong, Turkey, etc. Nigeria has 42 licensed Free Trade Zones and 14 functional and operational Free Trade Zones

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Guidelines on Simplified Compliance Regime for Value Added Tax (VAT) for Non-Resident Suppliers

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:

  1. Requirements for VAT registration under the regime
  2. Procedure for registration for VAT by NRS
  3. Supplies that are taxable in Nigeria
  4. Appointment of NRS as VAT Collection Agents
  5. Procedure for remittance of tax collected
  6. Procedure for deregistration
  7. 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

THE TAXAIDER NEWSLETTER VOL 3, ISSUE 10 (October 2021)

First Thoughts: Staying On Top Of Your Game

“How do I stay on top of my game”? This is a question I often get about self-development. The answer is simple, but not easy. However, it’s key to being the best version of yourself, thus maximizing your potential.

If you want to hit the top of your field, it’s important to understand what that really means. To stay on top isn’t just about winning, it’s about winning consistently. That means if this whole winning thing works out, you want to be able to keep doing it. I’m not saying that it’s impossible for someone to maintain their prowess forever with no help, but it gets harder with age, and the younger you are the better chance you have of staying on top.

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Tax Incentives for Business in Export Processing Zones (EPZ) and Free Trade Zones (FTZ)

Export Processing Zones and Free Trade Zones play a significant role in modern-day globalization, international investment, and free trade. While different countries treat Free Trade Zones (FTZ) and Export Processing Zones (EPZ) differently, almost all of them institute at least partial tax exemption for their citizens and companies operating within their territory. These arrangements led to large enterprises of various nationalities taking advantage of such favourable policies. 

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Tax Implications of Mergers and Acquisitions

As the economic policies of the country are evolving, businesses are always looking for ways to restructure their businesses in a bid to develop strong and efficient business policies to remain in business or stock quotation. Corporate restructuring could also be because of the failure of a business, a need for expansion, or an example when the government increased the minimum capital for banks and insurance companies. There are many ways in which a company can achieve business or corporate restructuring or reorganization.

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Transfer Pricing (TP): What You Need To Know

Transfer Pricing (TP) is described as the method by which connected organizations or related parties price goods, assets, services, intellectual properties, loans, and other commercial transactions between them. Transfer Pricing can be reasonably considered as an economic and legal tool used by business entities for the optimization of their tax burden. If the framework in which TP is implemented is legal, it provides significant tax benefits to businesses.

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THE TAXAIDER NEWSLETTER VOL 3, ISSUE 9 (SEPTEMBER 2021)

First Thoughts: 4th Quarter Musings

So, it’s that time again when we finally usher in the final lap of the year. Welcome to the last quarter of the year. Well, technically this would not begin until tomorrow, but it wouldn’t hurt to start enjoying the feeling already. Tomorrow, 1st October marks our dear nation’s 61st Independence Day celebration and ushers us into the fourth and last quarter of the year.

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THE TAXAIDER NEWSLETTER VOL 3, ISSUE 8 (AUGUST 2021)

First Thoughts: To Give or Not to give unto Caesar

Sometime last week, I came across a meme on social media. It was basically a screenshot of a WhatsApp conversation where the first person said “Hello, my name is Caesar” and the response of the other person was “Caesar, abeg wetin be your own no dey my hand o!” If you’re a student of the Bible or did some CRK at some point in school, you would remember the part where the Pharisees in a bid to test Jesus Christ asked him if it was right to pay taxes unto Caesar. Jesus responded with the line “Give unto Caesar what is Caesar’s and unto God what is God’s” and that is how that powerful quote came about.

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