Chairman of Nigeria’s Federal Inland Revenue Service, Babatunde Fowler, has announced that Nigerian banks will start charging Value Added Tax on local and foreign online transactions from January 2020.
Fowler, however, noted that the plan to tax online transactions will require legislative backing.
“In 2020, we will be asking the banks to charge VAT on online transactions. We have started engaging stakeholders and are now addressing all concerns around it,” he said
VAT is a consumption tax imposed at 5% on the cost of goods and services supplied in Nigeria except items specifically exempted or zero-rated under the VAT Act.
The Chairman has stated that the move by the FIRS to extend VAT collections to online transactions is part of the agency’s measures to meet its 2019 revenue target of ₦8 trillion.
The Chairman further stated that the FIRS will rely on multiple sources of information to widen the tax net and effectively capture all VATable transactions.
Directing the banks to impose VAT on online transactions could result in a number of unintended effects as it appears to impose additional obligations of monitoring and tracking various e-commerce transactions on banks.
This could also expose the banks to tax audit risks, as the FIRS would seek to ensure compliance and proper remitting of the VAT imposed.
More so, collection of VAT on such transactions by banks could amount to double taxation where the supplier of the good and service has already charged and remitted VAT on same transactions given that the VAT Act imposes the obligation to charge and remit VAT on the supplier of VATable goods and services.