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VAT Registration in Nigeria

Value Added Tax (VAT) is a significant revenue booster for the Nigerian government treasury as the various goods and services that are encompassed under the VAT implications have been experiencing monumental sales figures. The primary reason for the increase in sales is because of the general public getting exposed to the life simplifying products and amenities that were previously not available due to market vacancy. But ever since companies have realised the tax-friendly and vast resource nature of the Nigerian market, the economy has continued to build through disruptive industrial development.

The massive inflow of funds and investments into the Nigerian market prompted the Nigerian policymakers and taxation authorities to capitalise on opportunities and establish a sound taxation system to benefit the government. Since the economic growth is escalating with an upward trend, the government has decided to utilise the influx to support the business environment, therefore, investing in infrastructure and utility development to generate better factors for business growth in Nigeria. Thus the government initiated strategic initiatives to fuel disruptive innovation and to achieve globalisation standards to pan out a more lucrative future for Nigerian companies.

How to Register for VAT in Nigeria?

Initially, after six months of commencement of the operations in Nigeria, every business entity is obligated to apply for VAT with the FIRS under the Value Added Tax Act and norms/regulations of the FIRS taxation mandate. These guidelines, however, are subjected to a pre-designed prospectus of business entities functioning in industrial sectors which are not strictly regulated and monitored by the government. The companies that are subjected under the umbrella of VAT obligations are –

  • Products associated to medical and pharmaceutical usage
  • Basic packed food products
  • Educational materials such as books and stationery equipment
  • Baby-care products
  • Agriculture and farming equipment and products - fertiliser, commercially manufactured agricultural and veterinary medicine, farming equipment, farming vehicles, etc.
  • Export goods
  • Machinery imported for use in Export Processing zone or free trade zone
  • Plant, machinery and necessary equipment purchased for gas utilisation in petroleum refinery operations
  • Healthcare services
  • Services rendered by community banks and mortgage institutions
  • Theatrical performances and cultural events conducted by educational institutions to integrate learning in the education system

To register for VAT, the representatives of the company such as owners/company secretaries/director(s) must visit the Federal Inland Revenue Service (FIRS) office with the agenda to acquire their unique VAT number. Thus, to apply for VAT, applicants must fill the application form and submit the following documents –

For Limited Liability Company

  • Memorandum of Association (MOA) and Articles of Association (AOA)
  • Certificate of Incorporation forms - CAC2, CAC7
  • Filled and officially stamped VAT form 001
  • Utility bill of the company
  • Application letter on company letterhead document sheet

For Business Entities other than LLC

  • Certificate of Business Name Registration
  • Filled and officially stamped VAT form 001
  • Utility bill of the company
  • Application letter on business letterhead document sheet

Nature of VAT in Nigeria

The taxation system of Nigeria facilitates flexible legislative regulations for exercising the Value Added Tax (VAT) implications on the businesses operating in Nigeria. Value Added Tax is the tax that is charged o the purchase or subscription for various goods and services. The tax rate is 5% for taxable goods and services, whereas the Federal Inland Revenue Service (FIRS) provides for an outlined mandate of non-taxable products and services as well as they are strict government regulated. These outlined categories of goods and services that fall under the 0% taxable rate are –

  • Non-oil trade services
  • Import of commercial aircraft and spare part
  • Non-government initiated social services
  • Retail of machinery, equipment and tools utilised in the robust minerals sector
  • Agricultural equipment
  • Commercial vehicles for industrial transport
  • Non-packed foodstuffs
  • Residential rents
  • Medical and pharmaceutical supplies
  • Education-related materials
  • Limited range of financial services
  • Publications of books and newspapers

Apart from the goods mentioned above and services, all forms of purchases and sales are subjected to 5% taxes wherein the seller must also provide a VAT invoice to the buyer in the below-mentioned format –

  • Name, residential/commercial address and tax ID number of the supplier
  • Name, residential/business address and tax ID number of the customer
  • The official VAT number of the supplier
  • Date of supply
  • The unique VAT number of transaction
  • Description of the goods or services
  • Amount charged on VAT, sale price and the gross amount of the invoice

Importance of VAT in Nigeria

Registering for VAT in Nigeria exposes the business to various legislative benefits that become major benefits in the long run of the company’s life cycle. Usually, tax benefits in Nigeria are not just subjective to monetary cutoffs but are also associated with tax-friendly lenience regulations such as –

  • Tax Holidays
  • Rural local incentives
  • Export incentives
  • Export Expansion Grant (EEG) government scheme
  • Gas utilisation incentives
  • Tourism incentives
  • Interest incentives
  • Investment allowances
  • Foreign tax credit

All the incentives mentioned above are certain legislative benefits that can hold legitimate administrative powers to influence certain businesses such as trade, tourism and financial services such as – valuation services in Nigeria and audit services in Nigeria. On availing specific taxes incentives, businesses can function flexibly by reducing their long term expenses, thus, leading to the tax-friendly image developing around the outdated diaspora of Nigeria being a fuel dominated economy.

Now that you have all the necessary details to register VAT in Nigeria, you are partially prepared to set up a business in Nigeria. To simplify the administrative process and prevent your business from hindrance, the market also houses several third-party entities which provide VAT registration services in Nigeria. If you are an aspiring entrepreneur and are eyeing the Nigerian market as a future profit parade, then wait no more and exploit the vastness of the market. Contact us to simplify business incorporation in Nigeria and to avail post-incorporation services as well such as Company Secretarial services, Intellectual Property Right services, Payroll Outsourcing services and so on.