Nigeria VAT compliance for non-resident suppliers

Federal Internal Revenue Service (FIRS) has released guidelines on a simplified compliance regime for value added tax for non-resident suppliers (The Guidelines). The Guidelines clarify the obligations and procedures for value added tax (VAT) compliance by non-resident suppliers (NRS) supplying goods, services, or intangibles to persons in Nigeria through electronic platforms. The effective date is 1st January 2022 for the supply of services and intangibles and 1st January 2024 for goods.

1. Introduction 

Non-Resident Suppliers (NRS) of goods or services to Nigeria shall register and obtain a Taxpayer Identification Number (TIN). Non-Resident Suppliers are persons located outside the territory of Nigeria who supply taxable goods, services, digital products, or intangibles to Nigeria through digital or electronic platforms or an intermediary. The intermediaries are not the actual owners or suppliers of the goods or services but facilitate the supply, issue invoices, and receive payment.

2. Scope of the Guidelines

The Guidelines cover supplies of goods, services, intangibles, and other digital products by persons outside Nigeria to persons in Nigeria that are automated and require little human intervention. The VAT rate is 7.5%.

Taxable supplies do not cover broadcasting services, telecommunications services, services exempt from the VAT Act, and professional and consultancy services that are not automated but delivered via electronic mail.

3. Agents for collecting VAT 

Where the supply is through digital means, the NRS will be an agent of FIRS for collecting and remitting VAT to the central tax authority. NRS must register for VAT using its name, issue VAT invoices, deduct and pays VAT due on the supplies made to Nigeria. The intermediary or deemed supplier shall collect the VAT when receiving payment from the customer. Where the NRS derives a commission on sales, the tax should be collected and remitted to FIRS. Where the VAT on a supply has been accounted for, the supplier is exempt from further VAT obligation on that transaction.

4. NRS and Self-Charge principle

Where the supply is through digital means, the NRS will be an agent of FIRS for collecting and remitting VAT to the central tax authority. NRS must register for VAT using its name, issue VAT invoices, deduct and pays VAT due on the supplies made to Nigeria. The intermediary or deemed supplier shall collect the VAT when receiving payment from the customer. Where the NRS derives a commission on sales, the tax should be collected and remitted to FIRS. Where the VAT on a supply has been accounted for, the supplier is exempt from further VAT obligation on that transaction.

 For cross-border transactions, a taxable person who receives the supply of taxable goods or services in Nigeria or the appointed agent of FIRS will collect and remit VAT. Where the NRS fails or is not required to collect the tax, the person to whom the goods or service is supplied will withhold or self-account for the tax.

 

5. Registration for VAT 

A non-resident person that makes a taxable supply of goods and services to Nigeria shall register for tax with FIRS and obtain a Tax Identification Number (TIN). NRS who have registered for Nigerian VAT are also required to switch to the Simplified Compliance Regime via the link https://taxpromax.firs.gov.ng/nrtpPreregistrationPage 

NRS may appoint a representative or a third-party service provider to act on its behalf in fulfilling its VAT obligations. A service provider acting on behalf of an NRS shall register for tax in the name of the NRS. Subsequent correspondence with FIRS should include the name and TIN of the NRS.

 

NRS must register within 12 consecutive months immediately before the effective date of this guideline or any 12 consecutive months thereafter where it has supplied or expects to supply worth $25,000 (or its equivalent sum). Any NRS registered for Nigerian tax shall follow the compliance cycle unless it deregisters. Persons exempt from VAT is NGN25 million ($60,096 as at April 2022) under the Finance Act 2019. The threshold for exemption is higher than the one in the guideline of $25,000 (NGN10,400,000 as at April 2022). FIRS needs to clarify the variance as it differs from the Principal Act.

 

6. When to deregister

An NRS who has failed to meet the registration requirement for three consecutive years may apply for deregistration. A deregistered company can reactivate its registration in the future.

 

7. Payment and Filing of returns 

Tax is paid in the currency of the transaction. When the transaction is in a currency other than Naira, US Dollars, Euro, or British Pounds, the currency may be converted to these currencies using the Central Bank of Nigeria rate. NRS will follow up to obtain official VAT receipts for payment in foreign currency. 

 

The return can be filed online via the dedicated link or by sending the completed VAT Form 002NRS to the designated email. Filing of VAT returns is monthly: even for months where there is no taxable supply. Monthly VAT return is due 21 days after the end of the month of sale, except the taxpayer receives approval for an extension.

 

Updated: 26 April 2022 (The article contains the link for registration which was not available as at the date of issuing the circular in 11 October 2021.