Tax news

Investors and dealing members will begin to pay value-added tax for transactions carried out on the Nigerian Stock Exchange (NSE). This is due to the expiration of the Value-Added Tax (Exemption of Commissions on Stock Exchange Transactions) Order of 2014. During her tenure as coordinating minister for the economy and minister of finance, Ngozi Okonjo-Iweala had exempted VAT deductions from commissions earned on the traded value of shares, commissions payable to the Securities and Exchange Commission, commissions payable to the Nigerian Stock Exchange and commissions payable to the Central Securities Clearing System. At the time, Okonjo-Iweala said the purpose of the exemption was to encourage investments in the Nigerian capital market. VAT is a type of consumption tax placed on a product at every stage of processing/value addition. The cost is usually paid by the consumer. The order, which was a result of the powers conferred on the minister of finance in section 38 of the Value Added Tax (VAT) Act, was to be effective for five years. The section of the act empowers the minister to amend the rate of tax chargeable; and amend, vary or modify the list of exempted goods and services set out in the first schedule to the act. The five-year period lapses on July 25. Except there is an order from the ministry of finance extending the exemption, transactions carried out on the stock exchange will be eligible for VAT deductions. In an interview on Tuesday, Zainab Ahmed, former minister of finance, said the federal government has plans to raise VAT from the current 5% to 7.5% by 2020.   Source: The cable

Mrs Zainab Ahmed, former minister of finance, says the federal govt is planning to increase VAT from the current five percent to 7.5 percent by 2020 – The development comes amidst reports that the government is seeking to shore up falling revenue – Ahmed said the government had developed a strategic revenue growth initiative which was being implemented. The federal government is planning to increase the rate of value-added tax to 7.5 percent from the current five percent by 2020, says the former finance minister, Mrs Zainab Ahmed. The ex minister made the disclosure on Tuesday, June 25 at the Bloomberg Emerging & Frontier Forum in London, ThisDay reports. The development comes as Bloomberg reported that the government is seeking to shore up falling revenue. Nigerians had previously opposed earlier plans by the federal government to increase VAT. Ahmed, whose tenure ended with President Muhammadu Buhari’s first term on May 29, said that her main preoccupation while in office was how to raise government’s revenue with only 55 percent of targets being met. She said: “We have developed a strategic revenue growth initiative, which we have started to implement. “Our target is to increase revenue to 65 percent minimum in 2019 so that in the next three years we are able to attain 80-85 percent of our revenue target.” Recall that Legit.ng previously reported that the Federal Inland Revenue Service (FIRS) on Wednesday, March 20, refuted reports of a planned increment of Value Added Tax (VAT) by 50 percent to meet up payment of the newly proposed minimum wage. The head, Communication and Servicom Department, Wahab Gbadamosi, made this known in a statement in Abuja. He said that contrary to reports in the media, the FIRS chairman called for a reduction in Companies Income Tax (CIT) rate for small businesses so as to improve compliance.   Source: Legit

The Manufacturers Association of Nigeria has called on the Federal Government to jettison the idea of increasing the Value Added Tax by 50 per cent. MAN President, Mansur Ahmed, made this call on Wednesday, during the 35th Annual General Meeting of the Rivers/Bayelsa Branch of the association, held in Port Harcourt. Ahmed explained that the insistence on upward review of VAT would be counterproductive, especially in the light of the non-implementation of the long-awaited minimum wage. He also said that MAN had discussed with the Federal Inland Revenue Service with a view to addressing the numerous challenges in the tax system, adding that the result of such engagement was currently being felt in the nation’s business environment. ‘’We have advised the government to jettison the idea of increasing VAT by 50 percent as recommended by the Federal Ministry of Finance. We have clearly stated that such move will be counterproductive especially in the light of the still awaited minimum wage,’’ he stressed. The MAN president lauded President Muhammadu Buhari for consulting widely before signing the African Continental Free Trade Area Agreement in Niamey, Niger Republic. Ahmed assured MAN members that the Federal Government was committed to enhancing the capacity of Nigeria’s manufacturing sector to take advantage of the opportunities inherent in the continental free trade area and to mitigate the numerous risks. Earlier in his remarks, the MAN Chairman, Rivers/Bayelsa Branch, Senator Adawari Pepple, observed that the manufacturing sector was going through many challenges, including poor electricity supply and double taxation. Pepple explained that the theme of the AGM; ‘Redeeming our Economic Potential through Manufacturing’, was necessitated by the fact that manufacturing had continued to be the key driver of rapid economic growth and the creation of employment. He expressed the need for the country to revamp its critical industries, saying, “If we ignore the role of manufacturing in Nigeria as a tool for redeeming our economic potential, such act will be at our own peril. “However, the role of manufacturing in stimulating employment, directly or indirectly, is complex and requires careful analysis. Manufacturing plays an irreplaceable role in driving growth and economic development.’’ Explaining that the solution to unemployment lies in manufacturing, Pepple urged government at all levels to always reach out to MAN when policies with direct bearing on the manufacturing sector and the economy were being designed.   Source: Investor King

It is now one month to the expiration of the Value Added Tax (Exemption of Commissions on Stock Exchange Transactions) Order, 2014 (“the Order”). The Order was made in 2014 by the then. Co-ordinating Minister for the Economy and Minister of Finance in exercise of her powers under section 38 of the Value Added Tax (VAT) Act, Cap. V1, Laws of the Federation of Nigeria, 2004 and confers exemption from VAT on commissions:    Earned on traded value of shares; Payable to Securities and Exchange Commission; Payable to the Nigerian Stock Exchange; and Payable to the Central Securities Clearing System. The Order, which became effective on 25 July 2014, was to operate for 5 years as part of the Federal Government’s policy measures to encourage investments in the Nigerian capital market. Subject to any extension of the Order by the Minister of Finance, VAT would become applicable to commissions earned or payable on transactions conducted on stock exchanges in Nigeria effective 25 July 2019. Affected taxpayers should therefore take note and be guided accordingly.   Source: Proshare

The Court of Appeal (COA) in its judgement delivered today Monday, 24 June 2019 upheld the decision of the Federal High Court (FHC) in Vodacom Business Nigeria Limited (“Vodacom”) and Federal Inland Revenue Service (FIRS) on the applicability of value added tax (VAT) to satellite-network bandwidth capacities provided to Vodacom outside Nigeria by New Skies Satellites, a Netherlands-based non-resident company. The FHC’s judgement which adopted the “destination principle” for imported services to determine what was liable to VAT in Nigeria, was a significant departure from conventional practice where VAT was based on the “origin principle”. The destination principle holds that VAT is applicable in the territory where goods and services are consumed while under the origin principle, VAT is applicable in the territory where they are produced. The implication of the COA judgement is that Nigerian companies carrying on business with other companies outside Nigeria would be required to self-account for VAT on their transactions notwithstanding that the services were provided outside Nigeria, and regardless of whether the service providers charged VAT in their invoices.   Source: Proshare

More than one year after the pronouncement for Value Added Tax to be removed from air transport, the Federal Government has failed to implement the order. Findings by our correspondent showed that domestic airlines still pay VAT, charged as five per cent on every flight ticket sold and remitted to the Federal Government. The Media and Communications Manager, Dana Air, Mr Kingsley Ezenwa, said nothing had been said after the pronouncement made by President Muhammadu Buhari last year. President Buhari recently stated that the decision to remove VAT from domestic air transport was in line with global best practices and would make air travel more affordable and subsequently lead to the creation of jobs by the air transport service value chain as well as increase revenue for the government. But airline sources said they had only heard about the order but had yet to see it implemented. The Chairman and Chief Executive Officer, Air Peace, Mr Allen Onyema, said there had been the implementation of zero duty on spare parts but not on VAT. “We have been having back and forth with the Federal Inland Revenue Service. The Federal Government has pronounced it but the FIRS insists there is no gazzete. But they are implementing the zero duty on parts,” he said. According to him, aviation is a tough business and domestic carriers need support from the government. The Airline Operators of Nigeria, the umbrella body for airlines in the country, had estimated that its members were paying over N10bn as taxes annually. The Chairman of AON, Capt. Nogie Meggison, had recently stated that the situation was threatening airline operations. Shortly before the Executive Order, the AON had threatened that its members would no longer pay VAT with effect from June 14, 2018, saying that VAT remittance was unfair, as only domestic airlines were made to pay, while foreign airlines were exempted. The AON had lamented that air travel was also the only mode of transportation that was subjected to the payment of VAT, which had resulted in airlines not being able to optimally utilise their aircraft assets. The FIRS had been mute on the development, describing the order as a policy issue. The Director of Air Transport Regulations, Nigerian Civil Aviation Authority and member of the Presidential Committee on Airlines’ Taxes and Charges, Group Capt. Edem Oyo-Ita (retd.), said no reason had been given for the delay.   Source: Investor King