The Federal Government of Nigeria ("FGN") has in the last two fiscal years reiterated and demonstrated its commitment to improve the ease of doing business by ensuring that the tax and fiscal laws are reviewed to reflect current economic realities. This commitment has resulted in the amendment of various tax and fiscal legislation via the Finance Act 2019 ("FA 2019") and more recently, the Finance Act 2020 ("FA 2020").

The FA 2020 became law with the signing of the Finance Bill 2020 by President Muhammadu Buhari on 31 December 2020. With effective date of 1 January 2021, the FA 2020 amends 14 tax and fiscal legislations including the Value Added Tax Act ("VAT Act") and created the Crisis Intervention Fund and Unclaimed Fund Trust Fund.

This article focuses on the amendments to the VAT Act and provides a summary of the changes introduced by the amendments.

Addition to the List of Exempt Goods and Services

Part 1 and 2 to the first schedule of the VAT Act, which specifies the list of goods and services exempt has been expanded to include additional goods and services. Additions to goods exempt (part 1 of the schedule) includes commercial aircrafts, commercial aircraft engines and commercial aircraft spare parts.

The additions to services exempt (part 2 of the schedule) includes airline transportation tickets issued and sold by commercial airlines registered in Nigeria and hire, rent or lease of tractors, ploughs and other equipment for agricultural purposes.

By virtue of this amendment, the supply of the items added to the list of exempt goods and services will no longer be subject to VAT. 

Time of supply of goods and services

The new Section 2A of the VAT Act provides guidelines for the time of supply of goods and services. Supply is deemed to take place at the time an invoice or receipt is issued by the supplier, or payment of consideration is due, or received by the supplier in respect of the supply, whichever occurs first.

Consequently, where supply takes place between connected persons and no invoice has been issued, supply would be deemed to have taken place when goods have been delivered - for movable goods - and for non-movable goods and incorporeal, when they are available for use by the recipient, whereas for services, supply takes place when services are delivered. 

In addition, the new Section 2A provide clarity on the timing of supply of goods or services in instances where supply either takes place periodically or progressively, or supply is made in relation to any construction, erection, assembly, manufacture, alteration, improvement or repair activity and payments are made in instalments or periodically and in relation to the progressive nature of the work. 

In this case, supply will be deemed to have taken place whenever any payment becomes due or is received or an invoice is issued relating only to that payment received, whichever comes first. This will also apply where goods are supplied under an instalment credit arrangement.

VAT Registration by Non-Resident Person

Any non-resident person that makes taxable supply of goods or services to Nigeria is now required to register for VAT and obtain Tax Identification Number (TIN) from the Federal Inland Revenue Service (FIRS) based on the new Section 10 of the VAT Act. Further, the non-resident person is required to include VAT on invoices issued in respect of all taxable goods or services. He may appoint a representative for the purpose of his tax obligations in Nigeria. 

Previously, non-resident persons were required to register for VAT only if they were carrying on business in Nigeria. Further, they were required to use the address of the person with whom they have a subsisting contract for the purpose of correspondence with the FIRS. Nigerian companies to whom a supply of taxable goods or services is made are still required to withhold VAT and remit same to the FIRS in the currency of the transaction.  

New definitions and interpretations

Section 46 of the VAT Act introduces new definitions for animal feed and commercial aircraft spare parts and components while the definition of goods and services has been revised as follows;

  • animal feed; means any raw, semi-processed, processed and otherwise enhanced animal feed that is fed to domesticated and other animals raised and slaughtered for human consumption to provide beef, goat, lamb, pork, chicken, fish and other kinds of meat, as well as other animals cultivated and raised for the production of milk, eggs as well as other sources of protein and nutrients edible by humans.
  • commercial aircraft spare parts and components; means parts, engines, propellers, radio apparatus, instruments, appliances, furnishing, parts of any of the forgoing, and generally any other article of whatever description maintained for installation in a commercial aircraft in substitution for parts or articles removed. 
  • goods; all forms of tangible properties, movable or immovable, but does not include land and building, money or securities.
  • service; 

a)    anything, other than goods, or services provided under a contract of employment; and

b)    includes any intangible or incorporeal (product, asset or property) over which a person has ownership or rights, or from which he derives benefits, and which can be transferred from one person to another, excluding interest in land and building, money or security.

The specific details of what is animal feed and commercial aircraft spare part and components will provide the needed clarity and guidance to all stakeholders. Also, the new definition of goods and services will provide clarity on the exemption of land and building as well as interest in land and building from VAT. This will immediately resolve the controversies and arguments surrounding the treatment of sale, rental or lease of land and building for VAT purposes. 

Previously, the applicability of VAT on the sale or lease of land and building created several conflicts between the FIRS and taxpayers at different occasions. Recall the recent cases between Chief J.W Ellah & Sons Company Ltd vs FIRS and Ess-Ay Holdings Ltd vs FIRS where the Tax Appeal Tribunal gave conflicting judgements on the applicability of VAT on commercial lease which further created more confusion for taxpayers.

Conditions for Enactment of the Effective Date for VAT Rate Increase

The effective date for the commencement of VAT rate increase from 5% to 7.5%, which was passed into law via the FA 2019 has now being enacted. The effective date remains 1 February 2020. This resolves the controversies on whether the effective date should be 13 January 2020 (the date of signing the FA 2019) or 1 February 2020 as previously pronounced by the Federal Government, without any legislative backing.


The VAT Act amendments which takes effect from 1 January 2020 seems to have covered major areas of concern that existed in the pre-amended Act. These changes clearly demonstrate the Federal Government's commitment to align the Nigerian tax laws with global best practices while providing enabling environment for businesses to thrive.

It is expected that taxpayers are well informed of these changes in order to take advantage of the various benefits therein and comply accordingly.

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.