Nigeria e-commerce VAT 2020 plan
- Aug 28, 2019 | Richard Asquith
The Nigerian Federal Inland Revenue Service, ‘FIRS’, has confirmed plans to impose 5% Value Added Tax on online transactions from 1 January 2020. This will apply to resident and non-resident sellers of goods or digital services.
The Chairman of FIRS, Babatunde Fowler, indicated that this may include a Withholding VAT on foreign sellers’ transactions. This could be imposed as a requirement on payment providers to hold back 5% VAT on any payment between a consumer and a foreign e-commerce seller. Such a scheme operates in Argentina, and many other countries are looking at it to help reduce administrative costs of VAT registrations and for reducing the opportunities for evasion.
Nigeria has one of the lowest GDP to VAT revenue ratios on the continent of Africa - due to its narrow tax base and standard rate. The average African VAT rate is 16%. The prolonged depressed oil price has put pressure on the government to raise the VAT rate and look to broaden its tax base.