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 covered by VAT implications have been experiencing monumental sales figures. The primary reason for the increase in sales is that the general public is getting exposure to life-simplifying products and amenities that were previously not available due to market vacancy. However, ever since companies realised the tax-friendly and vast resource nature of the Nigerian market, the economy has continued to grow through disruptive industrial development.

The massive inflow of funds and investments into the Nigerian market prompted Nigerian policymakers and taxation authorities to capitalise on opportunities and establish a sound taxation system that would 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 achieve globalisation standards to create 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 with 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 into 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 out 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 for businesses operating in Nigeria. Value Added Tax is the tax that is charged on the purchase or subscription for various goods and services. The tax rate is 5% for taxable goods and services. In contrast, the Federal Inland Revenue Service (FIRS) provides for an outlined mandate of non-taxable products and services as well and they are strictly 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
• The 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 and audit services in Nigeria. On availing of specific tax 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 being hindered, the market also houses several third-party entities that 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 Rights services, Payroll Outsourcing services and so on.