5% VAT on Online Transactions: FIRS Explains

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The Federal Internal Revenue Services, FIRS has explained the details of the proposed 5 percent to be deducted on online transactions as VAT.

The Chairman of the FIRS, Babatunde Fowler had revealed the VAT plans in a recent interview, sparking fears that the move will hurt Nigeria’s budding e-commerce industry and FinTech start-ups.

In a tweet seen by Today’s Echo on Thursday, the FIRS has explained the move in 7 steps:

  1. VAT is payable on all listed items/services whether the transaction is online or offline as stated in the VAT act
  2. Payment of 5% VAT on online transactions as exemplified in the interview by the FIRS Chairman, Tunde Fowler is not an announcement of a new tax type
  3. The FIRS Act empowers the FIRS to appoint banks, other financial institutions, MDAs and other taxpayers as VAT collecting agents on online transactions
  4. Only transactions that are VATable(liable to be charged with VAT) whether online or offline will be subjected to payment of VAT
  5. All companies doing business online and remitting VAT will not pay double tax. Only online businesses that do not pay VAT will henceforth, need to pay VAT on VATable items
  6. VAT will not be charged on non-VATable items like medical and pharmaceutical products, basic food items, books and educational materials, baby products, all exports, locally-produced agricultural products and veterinary medicine
  7. According to the FIRS, Fowler wants taxation to be fair to all; those not in the tax net should be brought in so that no one who should be paying VAT is not.

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