Taxation

OVERVIEW OF VALUE-ADDED-TAX (VAT)

Recently, consumers have come to be aware of VAT mainly because it is usually charged when they patronize restaurants or supermarkets. While some consumers complain that the VAT charged is excessive, others are unaware of the purpose of such a levy.

Tax is a mandatory levy imposed by the government on individuals, businesses, or other entities to fund public expenditure and government activities. Value Added Tax is a tax levied on the value added on goods and services at each stage of production. According to the Federal Inland Revenue Service (FIRS), VAT is a consumption tax paid when goods are purchased and services rendered.

VAT is mainly charged to the final consumer, therefore, when a business sells goods or renders services, it adds VAT to the selling price which increases the amount the buyer was meant to pay. The business then collects the VAT and holds it until it is remitted to the government. When the buyer who is also a business resells the goods or services, they can deduct the VAT they paid on their previous purchase from the VAT they collected on their sales. At the next chain of supply, this event occurs until it gets to the final consumer who pays the full VAT without any ability to reclaim any portion of it. VAT is charged at a rate of 7.5%.

The law regulating VAT in Nigeria is the Value Added Tax Act of 1993. Section 2 of the Act provides that all goods and services rendered are taxable except those listed under the First Schedule of the Act, and they include; medical & pharmaceutical products, basic food items, books & educational materials, baby products, all exports, agricultural equipment, medical services, services rendered by community banks, all exported services and plays performed by educational institutions.

All taxable persons are mandated under the Act to be registered with the Federal Board of Inland Revenue within six months of the commencement of business. Taxable persons are also required to render returns on the tax collected. It should be noted that under the Act it is considered an offence to evade or aid in the evasion of tax. Taxable persons must also issue a tax invoice for the goods sold and services rendered.

In essence, taxable persons & consumers need to be guided to ensure they comply with the laid down regulations.

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About ISOH PRECIOUS AMAKA

Precious is a seasoned legal associate with a growing wealth of experience in corporate law, tax law, and litigation. As an associate who has worked with reputable law firms and is currently a legal associate at Orixine Consulting Limited, she specializes in providing comprehensive legal counsel to businesses of all sizes, from startups to multinational corporations. With a Bachelor’s degree in law from Benson Idahosa University where she graduated with a first class, Precious brings a deep understanding of complex legal issues and a strategic approach to problem-solving. She is known for her meticulous attention to detail, strong negotiation skills, and commitment to achieving favorable outcomes for her clients. Precious’ practice encompasses a wide range of areas, including contract law, intellectual property, employment disputes, tax law, medical law, and commercial litigation. She has successfully represented clients in state and federal courts across the country, as well as before regulatory agencies and arbitration panels. Outside of work, Precious enjoys spending time with her family, reading books, and volunteering with local youth recreational programs.