TAX TIPS & FACTS

Value Added Tax – What supplies are liable to VAT in Nigeria?

Many people have been asking me many questions about VAT in Nigeria since the last article.  It is necessary for every citizen to understand the basic principles of VAT and how VAT affects his/her pocket.  As long as you consume vatable supplies, you cannot avoid VAT, which is an Indirect Tax. 

Business owners are asking: “What are the items for which VAT should be charged?”

Answer

Any transaction for the sales of goods and services for a consideration in money or money’s worth is chargeable to VAT.  Only Exempt goods or services are free from VAT.

The list of goods and services that are exempt from VAT is shown in the First Schedule to the Value Added Tax Act.  They include the following.

Goods Exempt

1. All medical and pharmaceutical products
2. Basic food items
3. Books and educational materials
4. Baby products
5. Fertilizers locally produced agricultural and veterinary medicine, farming machinery and farming transportation equipment
6. All exports
7. Plant, machinery and goods imported for use in the export processing zone or free trade zone, provided that 100% production of such company is for export otherwise tax shall accrue proportionately on the profits of the company.
8. Plant, machinery and equipment purchased for utilization of gas in downstream petroleum operations.
9. Tractor, ploughs and agricultural equipment and implements purchased for agricultural purposes.
10. Proceeds from the disposal of short-term FGN Securities and Bonds
11. Locally manufactured sanitary towels, pads or tampons
12. Proceeds from the disposal or short-term State, Local Government and Corporate Bonds including supra-national Bonds.

Exempted Services

1. Medical Services
2. Services rendered by Microfinance Banks, People’s Bank and Mortgage Institutions.
3. Plays and performances conducted by educational institutions as part of learning.
4. All export services.  Exported service means a service rendered within or outside Nigeria by a person resident in Nigeria, to a non-resident outside Nigeria; provided that a service provided to the fixed base or permanent establishment of a non-resident person shall not qualify as exported services.
5. Tuition relating to nursery, primary, secondary and tertiary education.

ADEBOLA OLUBANJO