Section 14 (3) & (4) of the Value Added Tax Act introduced a self-account provision for all supplies for which VAT was not charged. Section 14 (3) of the Act provides that:
A non-resident company shall include the tax in its invoice and the person to whom the goods are supplied in Nigeria shall remit the tax in currency of the transaction.
Section 14 (4) provides that:
Where a person to whom taxable supplies is made in Nigeria is issued an invoice on which no tax is charged, such a person shall, self-account for the tax payable and remit the output VAT to the Service within the timeline prescribed under Section 15 of this Act. The due date for remittance according to Section 15 is on or before the 21st day of the month immediately following the month of the transaction.
For the purpose of clarity, the Federal Inland Revenue Service (FIRS) issued an information circular which explains that the Self-Account provision imposed a duty to withhold and remit VAT on a taxable person to whom a supply is made in Nigeria where:
- the supplier is a person exempt from charging VAT under the Act or otherwise failed to charge VAT;
- the supplier is a foreign company without a fixed base (permanent establishment) in Nigeria, whether or not VAT is included in the invoice;
The circular added that:
- The taxable person, in accounting and remitting the VAT, shall provide a schedule of all taxable transaction for which it is self-accounting, in the form prescribed by the Service, indicating the tax identification numbers of the suppliers in the schedule.
- Where a taxable person receives taxable supplies for which VAT was not charged from either a person below the threshold of N25million or any other person, the taxable person receiving the supplies shall self-charge and account for the VAT due.
- Return for VAT self-accounted or self-charged shall be separately made in the form prescribed by the Service.
Johnbull Enterprise is a small company whose annual turnover has never been up to N25million since commencement of business. The company rendered a service worth N2million to Oil Money Plc., a taxable company. Being a small company, Johnbull Enterprise did not include VAT on its invoice to Oil Money Plc.
In accordance with the self-account provision, Oil Money Plc. has an obligation to self-charge for a VAT of N100,000 and remit same to the FIRS on or before the 21st day of the month immediately following the month of the transaction.