The Nigerian Finance Act, 2021 grants the Federal Inland Revenue Service ("FIRS") new powers to appoint persons as Value Added Tax ("VAT") agents for the purpose of collecting and remitting VAT to the FIRS. In furtherance of this, the FIRS recently issued a public notice ("Notice"), appointing Telecommunications service providers- MTN and Airtel; and money deposit banks, as VAT agents and mandates them to collect/withhold VAT on taxable supplies made to them.

We have set out below, information to provide clarity on the notice.

1.What is VAT?

VAT is a consumption tax paid on goods and services supplied in Nigeria other than goods specifically excluded under the Value Added Tax. It is currently charged at the rate of 7.5%.

2. Application for a Type Approval Modification Certificate

Generally, suppliers of goods and services in Nigeria are required to collect VAT at the rate of 7.5% and remit it to the FIRS on or before the 21st day of the following month. Most service providers usually charge their clients VAT in addition to their fees.

3. What has the Notice changed?

By virtue of the Notice, money deposit banks (commercial banks), MTN and Airtel (the "New VAT Agents") are now required to withhold VAT on taxable goods and services supplied to them. The Notice also requires the New VAT Agents to remit VAT withheld to the FIRS on or before the 21st day of the following month.

4. When will the Notice take Effect?

The New VAT Agents are required to commence withholding VAT from January 1, 2023.

5. Is there any Penalty for Failure to Comply with the Provisions of the Notice?

The New VAT agents that fail to collect or withhold VAT from relevant contractors would be liable to pay a penalty of 150% of the amount not collected plus 5% interest above the CBN Monetary policy rate.

6. How can Service Providers Get a Refund For Input Tax Already paid?

Generally, the Value Added Tax Act permits taxable persons to offset the VAT paid by them on business costs (Input Tax) from VAT charged on their goods and services and payable by their clients (Output Tax). It is, however, important to note that only input tax paid on: i) goods purchased or imported directly for resale; and ii) goods that form the stock-in-trade used for the direct production of any new product on which the output tax is charged, is permitted to be deducted from the business' output tax.

Where the output tax exceeds the input tax, the taxable person will be required to remit the excess to the FIRS. However, where the input tax exceeds the output tax, the taxable person will be entitled to request a refund from the FIRS.

Under the Notice, the FIRS stated that businesses whose input tax exceeds their output tax would be entitled to a refund from the FIRS. The FIRS is also permitted to convert the amount refundable to credits for the purpose of offsetting their future VAT liability.


Although, we are not privy to the reasons for the authorisation of the New VAT Agents to commence the collection of VAT, this might be a test run by the FIRS for a system of VAT collection by consumers.

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.