The accommodation of the Federal High Cloister (FHC) in VODACOM BUSINESS NIGERIA LIMITED V. FEDERAL INLAND REVENUE SERVICE, handed bottomward on the bend of the New Year 2018, has understandably connected to accomplish a lot of altercation and angst.
The FHC in that case, upheld the accommodation of the Tax Appeal Tribunal, authoritative it the albatross of Nigerian companies to appraise Value Added Tax (VAT) payable on appurtenances and casework provided by adopted companies, and address aforementioned to the tax authorities.
This aphorism applies alike area the adopted aggregation is neither registered as a taxable article in Nigeria nor has it invoiced the bounded aggregation for VAT.
On its face, the court’s accommodation seems to aberrate from austere attempt which commonly accept activated to the estimation of tax laws, to blow on arresting the atrocity that could be occasioned if such austere attempt are applied.
Perhaps added importantly, the ability of this accommodation will accept an appulse on cross-border transactions, and gives actual account for Nigerian companies to ysis their VAT practices with adopted ally and account providers – in adjustment to ascertain and abate their abeyant exposures for VAT-able transactions.
A afterpiece assay of the facts of the case, will aid an acknowledgment of the court’s accommodation and its implications for Nigerian businesses.
Vodacom (the appellant) took the position, backed by Section 10 of the Value Added Tax Act, that in so far as a non-resident aggregation (NRC) (a adopted aggregation with which it entered into a arrangement to accumulation bandwidth) was unregistered for VAT purposes, and had not invoiced it (Vodacom) for VAT, Vodacom was not accountable to address any VAT for the accountable transaction to FIRS.
In essence, Vodacom argued that the obligation for the Nigerian aggregation to address tax to the FIRS, according to Section 10, alone applies if the adopted aggregation is registered for tax and has invoiced the bounded aggregation with VAT inclusive.
The cloister about alone this argument, captivation that such austere architecture of the accouterment would accommodate a chargeless escape avenue for tax evasion, abnormally back it would be administratively arduous to advance adjoin the adopted company.
Instead, the cloister active the adopted assumption of antipodal allegation captivation that the approved claim for allotment is airy for adopted companies and as such bounded companies arresting the goods/service are to appraise and address the VAT to FIRS.
It additionally captivated that for alien services, such as those basic the accountable of the burning case, area such casework are not exempted from tax beneath the VAT Act, the focus should be on whether the goods/ casework are fabricated to Nigerian consumers for consideration. Per Kuewumi J., in Appeal No.: FHC/L/4A/2016 (unreported).
It can conceivably be argued, certainly, from a action angle that the cloister absitively accurately and in accordance with the acceptation of the VAT Act. It is pertinent to agenda that VAT is after-all imposed on the customer of appurtenances and services.
Regardless of the controversies surrounding this decision, the FHC’s accommodation charcoal the law on this amount unless overruled by a cloister of above jurisdiction. As such, it is pertinent for Nigerian businesses to acquaint their adopted account providers accordingly, and endeavour to conduct their business affairs in the ablaze of the decision.
Companies and individuals who transact with adopted counterparts (either by acquirement of alien account or adopted products), alike in a ancient transaction, are now apprenticed to appraise their own VAT accountability according to the Act, allegation themselves and address aforementioned to the FIRS, behindhand of whether the adopted aggregation is registered for tax or has invoiced them for it or not.
Where the adopted ogue is appropriately a of the claim of allotment for VAT beneath our laws and the obligation to balance for VAT, this application can be factored into the transaction at the acceding and acceding stage; in adjustment to apprehend acquittal of VAT amount alert (once to the adopted company; the added anon to FIRS).
Finally, it is advantageous to accede the association this accommodation may accept back companies compute their banking statements. Put simply, it may be difficult for a bounded aggregation to assort the VAT answerable on itself (by itself, with no trail/invoice or request) and anon remitted to tax authorities beneath the acceptable VAT system.
In essence, the accommodation of the Federal High Cloister has alien into the Nigerian tax system, the assumption of about-face VAT or about-face allegation of VAT.
Arinze John-Paul Nsofor, Senior Associate; and Omolade Afonja, Junior Associate, are of the bartering law firm, Perchstone & Graeys.
(c) 2018 Daily Independent. All rights reserved. Provided by SyndiGate Media Inc. (Syndigate.info)., antecedent Middle East & North African Newspapers
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