The Value Added Tax Act (VATA or the Law), 2007 governs the administration of VAT in Nigeria. VAT is levied at each stage of the production chain at 5% of the value of the taxable good or service supplied, but it is eventually borne by the final consumer, being a consumption tax.

The VATA contains provisions which appear to support both the cash and accrual basis of accounting for VAT. The accrual basis requires taxpayers to account for VAT upon issuance of an invoice without involving the transfer of cash. On the other hand, the cash basis requires taxpayers to account for VAT on the basis of cash received.

 Section 15 of the VATA provides that “a taxable person shall render to the Board, on or before the 21st day of the month following that in which the purchase or supply was made, a return of all taxable goods and services purchased or supplied by him during the preceding month in such manner as the Board may from time to time, determine.”

The above section would appear to support accrual basis of accounting for VAT and implies that VAT should be accounted for on every transaction made in the preceding month, whether or not payment has been made or received. Also, the section appears to suggest that VAT charged on transactions of a taxable person, should be paid to FIRS on or before 21st day of the following month.Taxable goods and services means the goods and services not exempted from VAT

Taxable person includes an individual or body of individuals, family, corporations sole, trustee or executor or a person who carries out in a place an economic activity, a person exploiting tangible or intangible property for the purpose of obtaining income there from by way of trade or business or a person or agency of government acting in that capacity.

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