WHICH FINANCIAL INSTITUTIONS’ TRANSACTIONS ARE LIABLE TO VALUE ADDED TAX IN NIGERIA? THE FIRS PERSPECTIVE AND MATTERS ARISING
Value Added Tax (“VAT”) is a consumption tax that is levied at the rate of 7.5% on the supply of all goods and services that are backed by consideration, other than those goods and services that are specifically exempted under the First Schedule to the Value Added Tax Act, Cap. V1, LFN 2004 as amended (“VAT Act”). In this regard, Part II of the First Schedule to the VAT Act (as amended by the Finance Act, 2019) exempts services rendered by microfinance banks, peoples’ banks and mortgage institutions from VAT. Therefore, by implication all other financial institutions are required to charge VAT on their services.
In view of the above, the Federal Inland Revenue Service (“FIRS”) on 31st March, 2021 issued Information Circular No. 2021/04 and titled “Value Added Tax (VAT) on Services of Financial Institutions” (the “FIRS Circular”) which clarifies the position on chargeability of VAT on services rendered by financial institutions.
This article highlights the key provisions of the FIRS Circular and the legal issues arising from the FIRS Circular.
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