The Federal Inland Revenue Service (“FIRS” or “the Service”) recently issued Information Circular No.: 2023/01 (“the Circular”) on Guidelines on the Withholding and Self-Account of Value Added Tax (VAT) (sic) pursuant to the provisions of the VAT Act Cap.V1 LFN 2004 (as amended).
The Circular provides guidelines on the administrative and compliance obligations of companies charged with the responsibility to withhold VAT at source and/ or self-account for VAT on taxable supplies, in line with theVAT Act.
We have provided a summary of the key aspects of the Circular below:
1. Obligation to withhold VAT from suppliers
Section 13(1) and (2) of the VAT Act requires all ministries, statutory bodies or other agency of government (MDAs) and companies operating in the oil and gas sector to withhold, collect and remit VAT due on all payments made to contractors. Further, Section 14(3) of the VAT Act empowers the FIRS to appoint any person as an agent for VAT collection purposes.
Based on Paragraph 3 of the Circular, MDAs, companies operating in the oil and gas sector and any person so appointed by the FIRS to withhold VAT at source from payments to vendors, contractors or suppliers are, in addition to other existing obligation under the VAT Act, required to:
- prepare a separate schedule showing the name, tax identification number (TIN), address of the vendor, contractor or supplier, gross amount of the invoice, VAT charged on the supply and the month of return, as prescribed in Section 13(3) of the VAT Act;
- deduct or withhold the VAT stated on the supplier’s invoice;
- remit the amount withheld directly to the Service in the currency of transaction, separately from VAT collected on sales made by the taxpayer; and
- file the return of VAT withheld using the relevant module provided on the FIRS’ TaxPro-Max (TPM) platform.
2. Obligation to self-account for VAT
Section 14(4) of the VAT Act requires a person to whom taxable supplies are made to self-account for VAT where no tax is charged on such invoice.
The Circular clarifies that such a person is required to:
- compute and self-charge the applicable VAT on the transaction;
- prepare a separate schedule showing the name, TIN and address of the vendor, contractor or supplier, gross amount of the invoice, amount of VAT self-charged and the relevant month of the return;
- file the VAT return and remit the self-charged VAT to the Service, in the currency of transaction, using the relevant module on the FIRS’ TPM platform or any module or format as may be prescribed by the Service.
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