Effective Date of VAT Exemption Restriction on Non-Educational Books
The restriction on VAT exemptions for non-educational books, as outlined in the Value Added Tax (Modification Order) 2021 (MO 21), took effect on January 1, 2021.
Overview of the VAT (Modification Order) 2021 (MO 21):
The MO 21 is a legal directive issued by the Minister of Finance, empowered by the Value Added Tax (VAT) Act, to specify goods and services eligible for VAT exemption in Nigeria.
Key Highlights of MO 21:
- Restriction of VAT Exemption for Books and Educational Materials:
- Under the previous order (MO 20, issued in 2020), all books and educational materials were exempt from VAT.
- MO 21 revised this exemption, limiting it strictly to educational books and materials.
- Consequently, non-educational books — including fiction, novels, self-help books, and entertainment publications — are now subject to VAT at the rate of 7.5%.
- Other Goods and Services Covered:
- Agricultural inputs (such as fertilizers and seeds) remain VAT-exempt.
- Pharmaceutical products and medical services continue to enjoy VAT exemption.
- Renewable energy equipment (including solar panels) also remain exempt.
- Provisions for services relating to exported goods were refined to align with international trade standards.
Legal Authority for MO 21:
- The Finance Act 2019 and Finance Act 2020 granted the Minister of Finance the authority to issue Modification Orders to update the VAT exemption list.
- MO 21 was introduced to clarify exemption categories and address potential abuse or misclassification of VAT-free items.
Impact on the Book Industry:
- Prior to MO 21: All books, regardless of their nature, were exempt from VAT.
- Following MO 21: Only books classified as educational materials remain VAT-exempt, while all non-educational books are now subject to 7.5% VAT.
- For professional advice on Accountancy, Transfer Pricing, Tax, Assurance, Outsourcing, online accounting support, Company Registration, and CAC matters, please contact Sunmola David & CO (Chartered Accountants & Tax Practitioners) at Lagos, Ogun state Nigeria offices, www.sunmoladavid.com. You can also reach us via WhatsApp at +2348038460036.
