With the implementation of the Nigeria Tax Act (NTA) 2025, businesses engaging in taxable transactions should carefully assess their Value Added Tax (VAT) collection, withholding and remittance obligations. This is particularly relevant where a person has been appointed by the Nigeria Revenue Service (NRS) to collect or, where applicable, withhold and remit VAT.
The rules are especially important for transactions involving non-resident suppliers making taxable supplies to persons in Nigeria, as the VAT obligations may differ depending on whether the supplier has been appointed by the NRS to collect VAT.
Who Is Responsible for Withholding VAT?
The general principle is that VAT is collected by the person making a taxable supply. However, the NTA 2025 empowers the NRS to appoint persons, including non-resident suppliers, to collect VAT and remit the amounts collected to the Service.
The Act also provides specific provisions for taxable supplies made by non-resident persons. The following scenarios illustrate how these rules may apply:
1. Appointed Supplier Makes a Taxable Supply to a Nigerian Taxable Person
Where a person appointed by the NRS to collect VAT makes a taxable supply to a taxable person in Nigeria, the Nigerian recipient is generally not required to withhold the VAT.
The appointed supplier is responsible for charging, collecting and remitting the applicable VAT to the NRS.
However, where the appointed supplier fails to collect the VAT, the Nigerian recipient becomes responsible for withholding and remitting the VAT due to the NRS.
2. Appointed Non-Resident Supplier Makes a Taxable Supply
A non-resident person making taxable supplies in Nigeria is required to comply with the applicable tax registration and VAT requirements and include VAT on its invoice, where applicable.
Where the non-resident supplier has been appointed by the NRS to collect VAT, the supplier is responsible for collecting and remitting the VAT to the NRS, subject to the circumstances in which the recipient's withholding obligation may arise.
3. Appointed Non-Resident Supplier Fails to Collect VAT
Where an appointed non-resident supplier fails to collect VAT on a taxable supply made to a Nigerian taxable person, the Nigerian recipient is required to withhold the VAT due and remit it to the NRS.
Accordingly, the appointment of a supplier to collect VAT does not, in all circumstances, eliminate the recipient's VAT withholding obligation. Rather, the recipient's obligation arises where the appointed supplier fails to collect the applicable VAT.
4. Non-Resident Supplier Is Not Appointed to Collect VAT
Where a non-resident person makes a taxable supply from outside Nigeria to a person in Nigeria and has not been appointed by the NRS to collect VAT, the Nigerian taxable person receiving the supply is required to withhold the VAT due and remit it to the NRS, in accordance with the applicable provisions of the NTA 2025.
What Should Businesses Do?
Businesses should not assume that the responsibility for VAT collection or withholding rests solely with the supplier. Before processing transactions, particularly those involving non-resident suppliers, businesses should establish the VAT status and appointment status of their counterparties.
Businesses should also ensure that:
- The VAT status of suppliers and counterparties is properly verified.
- The appointment status of suppliers required to collect VAT is confirmed where relevant.
- VAT invoices and supporting documentation are properly maintained.
- VAT collected or withheld is remitted within the applicable statutory timelines.
- Appropriate controls are established to identify transactions where the recipient's withholding obligation may arise.
Understanding the applicable VAT collection and withholding rules is essential for managing tax compliance and mitigating the risk of interest, penalties and potential tax exposure under the NTA 2025.
For further guidance on the application of the Nigeria Tax Act 2025 to your business and transactions, please contact our Tax Advisory Team.