The President of the Federal Republic of Nigeria recently signed into law the Finance Bill 2019. The Bill now becomes an Act of the National Assembly to be cited as Finance Act, 2019. This Act amended seven principal revenue driven legislations to wit:
Scope of the VAT Act
By the content of the Finance Act, the interpretation of the scope of “goods” and “services” contemplated by the value Added tax Act is redefined and expanding the scope as it now covers both tangible and intangible items or property over which a right, interest, benefits, or ownership may be transferred or supplied.
New VAT rate
Specifically, by the provision of Section 33 of the Finance Act, the value added tax rate which was originally 5% has now been increased to 7.5%. This increment takes effect from the 1st February, 2020. All persons who supply goods and services including intangible items which are not exempted by the Act are advised to comply with the law by invoicing their clients/customers accordingly with the new rate.
Penalty for non-compliance
Value added tax returns are to be filed on or before 21st of every month for which the supplies is made. According to Section 40 of the Finance Act which amended Section 19 of the VAT Act, any failure to comply with collection and remittance provisions will attracts a penalty of 10% of the tax not remitted and interest at the prevailing central bank of Nigeria minimum rediscounted rate shall be added to the tax not remitted.
Conditions for threshold filing of VAT returns
Additionally, by Section 38 of the Finance Act which amended and substituted the old Section 15 of the VAT Act, any person whose turnover of taxable supplies either singularly or commulatively annually is less than N25,000,000 (Twenty-Five Million Naira) threshold is now exempted from filing the statutory monthly value added tax returns. In determining whether a person meets the threshold, the value of the following taxable supplies shall be excluded:
It is important to note that the N25,000,000 threshold filing does not however obviate the exempted person from invoicing any taxable person when taxable supplies are made and remit the amount so collected.
Copyright @ 2020 Bashir Ramoni, FCTI writes for SimmonsCooper Partners