Banks, MTN, others becomes tax collectors for FG in new policy

Commercial banks in the country and telecom firms are now to help the federal government collect the Value Added Tax starting from January 1, 2023, a new document released by the Federal Inland Revenue Service has revealed.

The new policy reads: “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.”

The Notice reads further, “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,”

FIRS also explained that, “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.”

It was also learnt that a supplier “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”.

READ ALSO: FG approves tax exemption, single-digit loan rates for investors

In the notice, Nami revealed that FIRS was willing to refund suppliers unable to recover their input tax, but this will be determined by section 17(2)(a) of the VAT act.

“And where the input tax paid to make the supply is not fully recovered from the output tax on other taxable supplies, the balance is refundable to the supplier; provided that a supplier who is entitled to a refund may utilise the amount refundable to offset future VAT liability or request for a cash pay-out.” FIRS added.

Explaining further that input tax on any overhead, service, and general administration of any business which otherwise can be expanded through the income statement (profit and loss accounts), according to the section 17(2)(a) of the VAT act, “shall not be allowed as deduction from output tax”.

According to PricewaterhouseCooper (PWC), in a statement addressing the new policy from FIRS, “Ordinarily under a VAT system, a supplier or service provider charges VAT on their invoice which is to be paid by the customer along with the price of the good or service for onward remittance to the FIRS.

“However, under the Withholding VAT rule, a customer is required to pay the vendor net of VAT while the VAT is remitted directly to the FIRS. Currently a similar arrangement is applicable to companies operating in the Oil & Gas sector as well as Government and their agencies.”

Advertisement