Value Added Tax (VAT) under the Nigeria Tax Bill 2024

An overview of changes, definitions and how VAT is addressed in the Nigeria Tax Bill 2024, including its application, rates, and exemptions.

Changes to VAT:

• VAT Rate: The bill introduces a phased increase in the VAT rate for all taxable supplies, with some exceptions:

10% from January 1, 2025, to December 31, 2025.

12.5% from January 1, 2026, to December 31, 2029.

15% from January 1, 2030, and thereafter.

• Basic items indicated in section 188 under part IV of chapter eight are taxed at 0% from January 1, 2025, and thereafter.
• Taxable supplies indicated in sections 187 and 189 under part IV of chapter eight are taxed at Nil from January 1, 2025, and thereafter.
• Repeal of VAT Act: The bill repeals the existing Value Added Tax Act.
• Taxable Supplies: VAT is imposed on all taxable supplies in Nigeria. The bill defines what constitutes a taxable supply and includes provisions for payment, collection, and remission of VAT.
• VAT on Non-Resident Persons: A non-resident person making taxable supplies to Nigeria must register for tax and include VAT on their invoices. The person to whom the supply is made in Nigeria must withhold the VAT and remit it to the Service if the non-resident is not registered.
• Fiscalisation: The Service can direct taxable persons to adopt electronic invoicing, given a 30-day notice.
• Input and Output VAT: The bill clarifies the definitions of input VAT (VAT paid by a taxable person on supplies) and output VAT (VAT collected by a taxable person on their supplies).

Remittance:

• If output VAT exceeds input VAT, the excess must be remitted to the Service.
• If input VAT exceeds output VAT, the excess can be used as a credit against subsequent months.
• A refund is possible for excess VAT not utilized as a credit, upon request and provision of necessary information.
• Collection of VAT by Persons other than the Supplier: Federal, State, and Local Governments, their ministries, departments, and agencies are required to collect or withhold VAT on taxable supplies and remit it to the Service. The Service can also appoint other persons to collect or withhold VAT.
• Self-Accounting for VAT: The Service may direct a taxable person to whom a taxable supply is made to self-account for and remit VAT if the invoice does not include VAT.
• VAT on Business Restructuring: VAT will not apply to business restructuring carried out in accordance with the bill.

VAT Definitions:

• Taxable Supplies: Any transaction for the sale of goods or the performance of a service, for a consideration.
• Goods: All forms of tangible properties, movable or immovable.
• Input VAT: The VAT paid by a taxable person on a taxable supply made to them.
• Output VAT: The VAT collected by a taxable person on making a taxable supply.
• Value of Taxable Supplies: When the supply is for money, it is the amount that, with the addition of VAT, is equal to the consideration.
• Value of Imported Taxable Supply: The price of the taxable supply plus taxes, duties, and other import charges, as well as commission, parking, transport and insurance up to the point of entry.

VAT Exemptions:

• Exempt Supplies: The following are exempt from VAT:
• Medical services, except for the services listed under the Tenth Schedule of the bill (Excise Duty on Services).
• Pharmaceutical products
• Educational services
• Baby products
• Basic food items.
• Books and educational materials.
• Fertilizers
• Locally produced agricultural chemicals.
• Locally produced veterinary medicine.
• Locally produced animal feeds.
• Agricultural seeds and seedlings.
• Money or securities, including interest in money or securities.
• Government licenses.
• Items listed under the twelfth schedule of the bill, unless otherwise specified.

Taxable Supplies Chargeable at Zero Percent:

The following taxable supplies are charged to VAT at a zero percent rate:

• Basic food items
• All medical and pharmaceutical products including medicinal herbal products
• Educational books and materials
• Fertilizers
• Locally produced agricultural chemicals
• Locally produced veterinary medicine
• Locally produced animal feeds
• Agricultural seeds and seedlings
• Electricity generated by GENCOs and supplied to the National Grid or NBET.

Other Exemptions:

• Electronic transfers below N10,000, transfers for salary payments, and intra-bank self-transfers are exempt from VAT.
• Exemption by Order of the President: The President may, by order, exempt any supply from VAT.
• Items with Suspended VAT: VAT collection on the following items is suspended or delayed until a date determined by the Minister:
• Petroleum products
• Renewable energy equipment
• Compressed natural gas (CNG)
• Commercial aircrafts, commercial aircraft engines, and spare parts
• Airline transportation tickets sold by commercial airlines registered in Nigeria.

Ministerial Classification:

The Minister may classify as exempt or zero-rated, equipment, components, and infrastructure related to the conversion and installation of Compressed Natural Gas (CNG) and Liquefied Petroleum Gas (LPG), including conversion kits.

These changes and definitions provide a comprehensive overview of how VAT is addressed in the Nigeria Tax Bill 2024, including its application, rates, and exemptions.