The Federal Inland Revenue Service (FIRS) has designated MTN, Airtel, and money deposit institutions in Nigeria to withhold Value Added Tax (VAT) levied on all taxable supplies made to them and remit to the Service.
This information is found in a public notice that the FIRS published on November 7 and was signed by Muhammad Nami, its Executive Chairman. The notice outlined the requirements of both businesses and their suppliers in relation to the withholding of value-added tax.
This notice informs [quotation]”all persons carrying on a trade, profession or business of any kind, tax practitioners and the general public that, with effect from 1st January 2023; in line with the provisions of Section 14(3) of the Value Added Tax Act Cap. V1 LFN 2004 (as amended), the following companies are appointed to withhold or collect VAT charged on all taxable supplies made to them: MTN; Airtel; and all money deposit banks—as defined by the CBN Guidelines.”[/quotation]
The FIRS stated that these businesses were required to remit the tax they would withhold in the format specified by the Service on or before the 21st day of the month immediately succeeding the month the tax was withheld.
The notice said, [quotation]“The companies shall remit the tax withheld or collected, in the currency of transaction, to the Service on or before the 21st day of the month immediately following the month the tax was withheld or collected;
“The tax withheld or collected under this notice shall be remitted in the format prescribed by the Service but separately from VAT due on the companies’ taxable supplies.”[/quotation]
The notice also listed the choices open to these companies’ suppliers whose output tax is withheld.
[quotation]“A supplier whose output tax is withheld, as provided in this notice, may deduct the input tax paid on the goods purchased or imported to make the taxable supply from the output tax collected on other taxable supplies.”[/quotation]
The Notice stated that a supplier who is entitled to a refund may use the amount recoverable to offset future VAT liabilities or request a cash payout. [quotation]”And where the input tax paid to make the supply is not fully recovered from the output tax on other taxable supplies,” it added.[/quotation]
It further stated that the VAT Act’s Section 17(2)(a) restrictions apply to input tax claims, which include refunds, and that the Service has put in place sufficient safeguards to ensure rapid payment of refundable input tax under this arrangement.
