Input VAT in Nigeria refers to the value-added tax paid on business purchases and expenses. This tax is credited against the output VAT charged on sales, allowing businesses to reclaim the VAT paid on their inputs and ultimately easing their tax burden.

Before the implementation of Input VAT in Nigeria in 1998, businesses faced the challenge of being unable to offset the VAT they paid on their inputs against the VAT they charged on their sales. As a result, they were subjected to double taxation on the same value, placing a heavy burden on their financial resources.

Recently, Nigeria has witnessed significant advancements in the implementation of Input VAT. A notable transformation took place in 2019 with the enactment of the Finance Act. This ground-breaking legislation not only raised the VAT rate from 5% to 7.5% but also introduced modifications to the calculation method for Input VAT. Notably, businesses are now empowered to deduct the VAT paid on capital goods from their Input VAT. These enhancements provide businesses in Nigeria with increased flexibility and advantages, alleviating their tax burden and streamlining the process of VAT filing.

The Federal Inland Revenue Service (FIRS) has recently updated the VAT filing process on Tax Promax. The essence of Input VAT is to ensure that businesses are not taxed twice on the same value. When a company purchase goods or services that are subject to VAT, they remit the VAT to the supplier. However, once the business sells those goods or services, they are required to apply VAT to the sale. This implies that the VAT is essentially paid twice; (1) by the business when they purchase the goods or services, and (2) by the customer when they purchase the goods or services from the business.

The amendments made to Input VAT in the Finance Act aim to streamline the calculation process and facilitate the reclaiming of VAT paid by businesses on their inputs. These reforms are anticipated to provide significant advantages to Nigerian businesses, easing their tax burden and reducing overall taxation. By uploading a purchase schedule, WVAT schedule, or purchase imports schedule, taxpayers can now easily recover the VAT paid on their inputs.

When preparing the purchase schedule, make sure to provide the following details:

  • The name of the supplier and their TIN (Tax Identification Number)
  • The date when the purchase was made
  • The amount of VAT that was paid
  • A comprehensive description of the goods or services that were purchased.

The WVAT schedule should include the following details:

  • The name and Tax Identification Number (TIN) of the withholding agent.
  • The date when withholding took place.
  • The amount of VAT that was withheld.
  • A description of the goods or services that were purchased.

When preparing the purchase imports schedule, it is important to provide the following essential details:

  • The importer’s name and TIN (Tax Identification Number).
  • The date when the importation took place.
  • The precise amount of VAT that was paid.
  • A comprehensive description of the goods that were imported.

The FIRS also introduced new guidelines on how suppliers and importers can file Input VAT on Tax ProMax. These changes include the requirement for suppliers and importers to upload a purchase schedule when claiming Input VAT. Additionally, the auto-credit feature for purchases will be disabled. Furthermore, suppliers and importers will now need to make adjustments for purchases that are not used in making vatable supplies. These updates aim to streamline the VAT filing process and ensure that businesses can easily claim back the VAT paid on their inputs.

To comply with the updated procedures, it is essential for all individuals and entities involved in the VAT process to take the following steps:

  1. Ensure that you have completed your registration for Tax-ProMax, if you haven’t already done so.
  2. When claiming Input VAT, make sure to submit a purchase schedule.
  3. Incorporate an adjustment for any purchases that are not utilized in generating taxable supplies.
  4. Keep accurate records of all your VAT transactions.

These actions are crucial to ensure a seamless and efficient VAT filing process on Tax Promax. By following these guidelines, you can easily recover the VAT paid on your inputs, reducing your tax burden and benefiting your business in Nigeria.

These changes will have a significant impact on all parties involved in the VAT process;

  • Suppliers and importers must be meticulous in tracking their purchases to ensure they can rightfully claim the complete amount of Input VAT that is owed to them.
  • The FIRS will possess advanced capabilities to effectively monitor compliance with VAT regulations.
  • Consequently, there may be a surge in the issuance of VAT assessments and penalties.

Taxpayers are required to promptly file their VAT returns and upload the necessary schedules within the same month of the transactions. In the event that a taxpayer’s input VAT claim is not verified on Tax Promax by the 21st of the month, they have the option to directly contact the FIRS for manual tracing of the claim. However, if the claim remains unconfirmed by the 30th of the month, the FIRS reserves the right to close the claim, resulting in penalties for the taxpayer.

The implementation of the new system may bring about a few potential challenges, such as its intricate nature and usability, particularly for small businesses. Furthermore, there is a possibility of vulnerability to fraudulent activities and potential delays in the processing of VAT refunds.

To ensure a seamless transition, we highly recommend that our clients take the following proactive measures in preparation for the upcoming Input VAT filing procedures:

  1. If you haven’t already, register for Tax-ProMax.
  2. Familiarize yourself with the newly introduced procedures.
  3. Maintain accurate and detailed records of all VAT transactions.

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