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FIRS raises seven points to clarify the impending 5% charge on online transactions

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Chairman of FIRS, Mr. Babatunde Fowler on 5% VAT on online transactions
The Federal Inland Revenue Service (FIRS), has moved to clear any confusions surrounding the interview granted by the Executive Chairman, Tunde Fowler, to the media on 5% VAT on online transactions.

The FIRS clarification has become necessary following the backlash from Nigerians towards the news of the impending taxation of online transactions from early next year.

FIRS made the clarification through a video of about a minute and fifty-three seconds length and was tagged “7 Things To Know About Taxation of Online Transaction”.

A buyer conducting online transactions

Below are the 7 points shared.

  1. VAT is payable on all listed items / services whether the transaction is online or offline as stated in the VAT act.
  2. Payment of 5% VAT on online transaction as exemplified in the interview by the Executive Chairman, FIRS, Tunde Fowler, is NOT an announcement of a new tax type.
  3. The FIRS Act empowers the FIRS to appoint banks, other financial institutions, MDAs and other taxpayers as VAT COLLECTING AGENTS. It is in the banks’ role as collecting agents on online transactions that he referenced in the interview.
  4. ONLY transactions that are VATable (i.e liable to be charged with VAT) whether online or offline will be subjected to payment of VAT.
  5. All companies doing business online and remitting VAT will NOT pay double tax. Only online businesses that DO NOT pay VAT will need to henceforth pay VAT on VATable items.
  6. VAT will not be charged on NON_VAtable goods like all medical and pharmaceutical products, basic food items, books and educational materials,baby products, all exports, locally produced agricultural and veterinary medicine.
  7. Fowler wants taxation to be fair to all: those not in the tax net (online or offline) should be brought in so that no one who should be paying VAT is not.
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The video was concluded with an apparent response to the accusation made by most Nigerians; of the Nigerian Government and the FIRS stifling the growth of MSMEs and startups with multiple taxations.

The Conclusion reads: “FIRS has been collaboration with the FG on the MSME clinic project to enhance growth of SMEs. FIRS DOES NOT intend by any means to stagnate the growth of SMEs or online businesses.”

While this move to explain to Nigerians is coming a bit late, and it also remains to be seen if Nigerians would buy the explanations given, the video does make things a bit clearer. However, the effect on the country’s e-commerce sector will only be known when it is implemented.

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