The Federal Inland Revenue Service (FIRS) issued Information Circular No. 2023/01 on 3 March 2023, detailing guidelines for the withholding and self-accounting of Value Added Tax (VAT). These guidelines are crucial for understanding the legal obligations and procedures related to VAT management in Nigeria. Here are the key points outlined in the circular:

Guideline on the Withholding and Self-Account of VAT

The circular serves as a comprehensive guide for the general public, tax practitioners, and taxpayers regarding VAT withholding regulations as per the Value Added Tax (VAT) Act Cap VI LFN 2004 (as amended).

Legal Framework

The circular elaborates on several sections of the VAT Act concerning VAT withholding and self-accounting:

• Section 10(3) mandates taxable persons to withhold VAT on transactions with non-residents.
• Section 13(1) requires government agencies to deduct and remit VAT on payments to contractors.
• Section 13(2) empowers FIRS to direct oil and gas companies to withhold VAT.
• Section 14(3) allows FIRS to appoint entities for VAT withholding.
• Section 14(4) mandates self-accounting for VAT when not charged on invoices.

Withholding of VAT on Taxable Supplies Received

Companies are obligated to withhold VAT on taxable supplies received, separate from collecting and remitting VAT on their own taxable supplies. Proper invoicing and documentation are emphasized.

VAT Obligations

Companies under the legal framework specified in the circular have obligations related to VAT collection, withholding, and self-accounting. These include:

• Collecting VAT on invoices to customers.
• Withholding VAT on supplier invoices as per guidelines.
• Self-charging VAT when not included in supplier invoices.
• Following specific procedures for reporting and remitting VAT to FIRS.

Accounting for VAT Withheld

Companies must maintain separate accounts for VAT withheld, accurately record VAT transactions, and make these records available for audit as required.

Error or Omission on Remittance Schedule

The circular stresses the importance of accurately populating VAT remittance schedules to avoid unintended errors in VAT credit allocation.

VAT Returns

Timely filing of VAT returns, using the designated online platform (Taxpro Max), and remitting VAT due are essential obligations for all taxable persons.

Conclusion

The FIRS Guidelines on Withholding and Self-Account of VAT provide a structured framework for compliance with VAT regulations in Nigeria. Adhering to these guidelines ensures transparency, accuracy, and efficiency in VAT management processes. Taxpayers and tax practitioners are encouraged to familiarize themselves with these guidelines to navigate the VAT landscape effectively and contribute to a robust tax environment in the country.

For professional advice on Accountancy, Transfer Pricing, Tax, Assurance, Outsourcing, online accounting support, Company Registration, and CAC matters, please contact Inner Konsult Ltd at www.innerkonsult.com at Lagos, Ogun state Nigeria offices, www.sunmoladavid.com. You can also reach us via WhatsApp at +2348038460036.