Nigeria: Appointment of VAT collection agents
Appointed VAT agents will be responsible effective 1 January 2023
Appointed VAT agents will be responsible effective 1 January 2023
The Federal Inland Revenue Service (FIRS) issued a notice appointing two particular telecommunications companies and all money deposit banks (as defined by the Central Bank of Nigeria (CBN) guidelines) as value added tax (VAT) collection agents.
The appointed VAT agents will be responsible effective 1 January 2023 for withholding VAT at source on all taxable supplies made by their vendors and remitting those amounts to the FIRS in the currency of transaction. Failure to comply with the new directive by the VAT agents will result in a penalty of 150% of the amount not collected, plus 5% interest above the CBN monetary policy rate.
The FIRS clarified that the affected suppliers to the VAT agents can deduct their allowable input VAT from the output VAT collected on other taxable supplies and from future VAT liability.
Finally, the FIRS noted that it has put measures in place to ensure a prompt payment of cash refund if the taxpayer (whose allowable input VAT exceeds the output VAT collected from other supplies) requests a cash refund.
KPMG observation
The appointment of companies operating in specific sectors of the economy as VAT agents is not new in Nigeria. Companies operating in the oil and gas sector were appointed in 2007 as agents for collection of VAT on all taxable supplies made to them. The current appointment to money deposit banks and specific telecommunication companies will allow the FIRS to leverage the resources, technology and reach of these companies to improve VAT collection and reduce the incidence of VAT debt while reducing cost of collection.
However, the FIRS failed to consider a situation in which the money deposit bank or the particular telecommunication company is the only customer of the supplier. In that situation, the supplier will be in a perpetual refund position and may not be able to get its refund as and when due.
Read a November 2022 report prepared by the KPMG member firm in Nigeria
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