A Nigerian subsidiary of a South African entity entered into an agreement to provide marketing services in Nigeria to promoted the "Fund" of the South African entity.
The issue in contention was whether or not the marketing services provided by the Nigerian entity qualify as exported services that are exempt from VAT.
The VAT Act defines exported services as those "performed by a Nigerian resident or a Nigerian company to a person outside Nigeria."
The TAT ruled that the marketing services are liable to VAT in Nigeria on the basis that the services were performed to Nigerian customers, for and on behalf of the foreign entity. The TAT mentioned that the basis for charging VAT in cross-border transactions is "where the service was performed and not the location of the consumer". Therefore, since the services were performed in Nigeria, such services were not exported and should be subject to VAT.
This judgement raises important questions:
- Are marketing services for the benefit of the customers or the seller?
- Do people rendering a service to a non-resident have to be exported for the services to qualify as exported services?
- On the flip side, does this not contradict the ruling of the court on the applicability of VAT on imported services?
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