Nigeria: Has The Decision In Vodacom vs FIRS Imposed VAT Liability On All Imported Services Into Nigeria?

Last Updated: 19 September 2019
Article by Olaleye Adebiyi
Most Read Contributor in Nigeria, September 2019

The taxation of services supplied by non-resident foreign companies (NRCs) to Nigerian companies has been an issue of great debate in recent times. On 24 June 2019, the Court of Appeal held, in the case between Vodacom Business Nigeria Limited (Vodacom) v Federal Inland Revenue Service (FIRS) that the supply of satellite bandwidth capacities from an NRC to Vodacom (a Nigerian based company) is subject to Value Added Tax (VAT) in Nigeria.

Based on the facts of the case (and only on that strength), the Court of Appeal in the Vodacom case was correct to have subjected supply of bandwidth capacities to Vodacom to VAT. However, the rationale used by the Court to then attempt (as it seemed to do), to assert that all imported services are liable to VAT in Nigeria, appears to be at variance with the express provisions of the VAT Act, which requires that imported services be supplied in Nigeria before VAT liability can arise.

In the Vodacom decision, the transaction qualified as a VATable supply under the VAT Act because Vodacom had received the bandwidth capacities with equipment located in Nigeria. Although and sadly so, the Court of Appeal in reaching this decision had jettisoned the distinction between the location of supply of a service and the location of receipt of such service and inadvertently interpreted the supply of a service and the receipt of a service to mean the same thing in determining the VATability of a transaction.

Therefore, following the Court of Appeal's decision, a number of stakeholders have taken a view that the decision has expanded the scope of the VAT liability of Nigerian resident companies to include all forms of services rendered by NRCs whether or not such services are physically supplied in Nigeria (by employees or via some form of equipment located in Nigeria). However, this position clearly contradicts the provisions of the VAT Act.

This Article analyses the Court of Appeal's decision in the Vodacom case vis-à-vis the relevant provisions of the VAT Act and also seeks to distinguish the Vodacom case from other forms of cross border transactions which do not require any form of physical presence in Nigeria.

Summary of the Vodacom Case

Vodacom challenged a VAT assessment imposed on it by the FIRS in respect of a transaction involving the supply of satellite network bandwidth capacities by a non-resident company. Although the bandwidth was received through Vodacom's transponders in Nigeria, Vodacom argued that the transaction was not subject to Nigerian VAT because Section 2 of the VAT Act only imposes VAT on services rendered in Nigeria and this supply was not performed in Nigeria but was only received in Nigeria.

Vodacom filed an appeal at the Tax Appeal Tribunal and subsequently at the Federal High Court (FHC) but Vodacom lost at both levels. Dissatisfied with the FHC's decision, Vodacom appealed to the Court of Appeal.

The Court of Appeal held that Vodacom was liable to self-assess and remit VAT on the said transaction. In giving its decision, the Court of Appeal recognized the fact that although the satellite network was in the orbit, the bandwith was received in Nigeria through Vodacom's transponders. Thus, the service was rendered in Nigeria and liable to Nigerian VAT.

A detailed review of the facts of the Vodacom case would reveal that in addition to the fact that the services were received in Nigeria, there was also an element of physical supply of the bandwidth capacities in Nigeria through Vodacom's transponders in Nigeria. As such, the Court of Appeal ought not to have relied solely on the fact that the services were received in Nigeria but to have focused more on the element of physical supply of the bandwidth capacities through Vodacom's transponders in Nigeria instead (relying on Sections 2, 10 and 46 of the VAT Act). Unfortunately, the Court did not apply the clear provisions of the law in determining the VATability of the transaction in this case.

The Position of the Nigerian Law on the VATability of Imported Services

Section 2 of the VAT Act provides that VAT is to be charged and paid on the supply of all goods and services except those expressly exempt under the VAT Act. However, Section 10 of the VAT Act provides that an NRC that carries on business in Nigeria should register for tax with the tax authorities and the person to whom the services are supplied to in Nigeria is to remit the tax to the FIRS. While Section 2 of the VAT Act is a general provision which provides for taxation of supply of goods and services, Section 10 of the VAT Act specifically speaks to the supply of services by NRCs.

It is trite that when a general rule of law is followed by a more specific rule, the specific rule should qualify the general. Thus, in the case between Martin Schroeder & Anor v Major & Company (Suit No: SC/84/1986), the Supreme Court upheld the principle that where there are two provisions, one specific and the other general, covering the same subject matter, a case falling within the words of the specific provision must be governed by the specific provision.

Relying on the foregoing, it is important to analyse whether a non-resident company has carried on business in Nigeria and whether such NRC has in fact supplied services in Nigeria in order to determine whether VAT applies to such transaction. To give credence to this position, Section 46 of the VAT Act defines "imported service" as a "service rendered in Nigeria by a non-resident person to a person inside Nigeria".

The definition of the phrase "carrying on business in Nigeria" has been in contention given that it was not defined under the VAT Act. In the case between FIRS v Gazprom Oil & Gas (Suit No: FHC/ABJ/TA/1/2015), an NRC provided advisory and consultancy services to a Nigerian company. The service was performed and completed outside Nigeria and the receipt of the service by the Nigerian company did not require any act of the NRC nor constitute the act of rendering advisory services.

In determining whether the NRC concerned carried on business in Nigeria, the Federal High Court referred to the case of Edicomsa International Inc. & Associates v CITEC Int'l Estates Ltd (2006) 4 NWLR Part 969 Page 114. In that case "carrying on business" was defined to mean the conduct or prosecution of a particular vocation or business either as a continuous operation or permanent occupation. Unfortunately, jettisoning the clear position it had so eloquently analyzed, the Federal High Court held that the NRC did not require any physical presence in Nigeria to carry on business of supplying consultancy and advisory services in Nigeria. Another judicial (rather than legislative) enactment of VAT obligations.

It is important to note that in Ahmadu v Governor, Kogi State (2009) 1TLRN 319 the Court of Appeal held that tax laws should be interpreted strictly and the language of a tax law should not be strained in order to tax a transaction which would have been covered by appropriate words if the legislature had thought of it. The Court went further to say " a taxing legislation, there is no room for any intendment, there is no equity about tax no presumption at all and nothing is to be read in and nothing to be implied".

As such, other rules of interpretation, which deviate from the literal interpretation of the tax laws should not be employed where the words are plain and unambiguous.

Based on the foregoing, the provisions of Section 10 and 46 of the VAT Act are clear and unambiguous and effect must be given to their ordinary and literal meaning. If the draftsmen of the VAT Act contemplated for all services supplied by an NRC to be subject to VAT even without physical presence in Nigeria, then the specific inclusion of the clause "that carries on business in Nigeria" would not have been included in Section 10 of the VAT Act. Thus, based on the strict provisions of the VAT Act, it is my view that transactions such as advisory, consultancy and other legal services wholly performed outside Nigeria are not liable to Nigerian VAT where there is no physical presence/element (such as Vodacom's transponders) in the delivery of such service in Nigeria.

So, in my opinion, there is no general rule in Nigeria that all imported services are liable to VAT. Each case still has to be considered on its facts.


In the final analysis, the courts should be minded to give effect to the clear provisions of statute and in the event of any ambiguity, such ambiguity is expected to be resolved in favour of the taxpayer.

In S.E Ola v Federal Board of Inland Revenue (2011) 5TLRN 136, the Supreme Court of Nigeria held that provisions of taxing statutes are always strictly interpreted and likewise that where ambiguities arise in the procedure in taxation matters, it is the construction or presumption that is more favourable to the assessee or that person chargeable to tax that should prevail or be adopted.

Thus, in the absence of any legislative amendment to the clear provisions of Sections 10 and 46 of the VAT Act, the provision of the law remains that an NRC must carry on business in Nigeria its services to be subject to VAT in Nigeria. In this regard, there must be an element of physical presence of the NRC in Nigeria in the performance of its services. On the facts, Vodacom affirmed rather than departed from this position of the law. Thus, transactions or services which are rendered completely outside Nigeria could not be regarded as business carried out in Nigeria for the purpose of VAT liability.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions