Nigerian Legislation And Its Shades of Gray – Value Added Tax


In the last two years and within 7 months apart, two divisions of the Tax Appeal Tribunal (TAT), in Abuja and Lagos, gave conflicting decisions on two cases with similar facts. The underlying issue for consideration was the applicability of Value Added Tax (VAT) is applicable on services rendered by a non-resident1 to a Nigerian company.

In Gazprom Oil & Gas Nig. Ltd (Gazprom) v Federal Inland Revenue Service (FIRS), Abuja TAT held that a non-resident company (NRC), which rendered service to a Nigerian company exclusively outside Nigeria was not obliged to register for VAT pursuant to Section 10 of the Value Added Tax Act (VATA). The NRC was therefore under no obligation to charge VAT on its invoice. Consequently, Abuja TAT held that since VAT was not charged, the Nigerian company had no obligation to deduct VAT as the provision of Section 10(2) of VATA, which mandates deduction of VAT (from payment to a non-resident service provider), was not triggered.

Conversely, in Vodacom Business Nig. Ltd (Vodacom) v FIRS, TAT sitting in Lagos relied on Section 2, the charging provision that imposes VAT on supply of goods and services, in reaching its conclusion. Lagos TAT held that VAT applied to supply of bandwidth by an offshore entity with no presence in Nigeria. Thus, the Nigerian recipient of the service was obliged to deduct and remit VAT to the tax authorities in the currency of the transaction.

The representatives of Vodacom drew Lagos TAT’s attention to the decision in Gazprom to persuade the Tribunal to reach the same conclusion. Lagos TAT, however, stated that the Gazprom case was held in error (per incuriam) as Section 10 (which formed the basis of Gazprom’s decision) is an administrative provision which does not impose VAT.

These conflicting decisions show the inadequacies and ambiguities in VATA regarding the taxation of “imported service”. In this regard, it becomes imperative to examine the legislative provisions critically.

Generally, substantive tax laws have three major ingredients:

  • Charging provisions – these are provisions that impose tax
  • Ambit – this relates to eligible persons and transactions
  • Administrative provisions – these are provisions relating to collection and dispute resolution procedures
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