From Nigeria: Federal High Court Rules on VAT Treatment of Transactions between Non-Resident Companies and Nigerian Companies

Olaleye Adebiyi - Andersen LP in Nigeria, a member firm of Andersen Global

The increase in information technology and e-commerce activities has introduced some novel issues on the appropriate treatment of Value-Added Tax (VAT) on cross-border transactions. Sadly, the Nigerian legislative framework has not evolved in the same proportion to effectively address the taxation of services where the suppliers of such services are not resident and registered for VAT purposes in Nigeria.

The Federal High Court, on December 19, 2017, ruled in the case between Vodacom Business Nigeria Limited (Vodacom) and the Federal Inland Revenue Service (FIRS) that the supply of satellite network bandwidth capacities by a non-resident company (NRC) to a Nigerian company for a consideration is subject to VAT in Nigeria, thereby affirming the decision of the Tax Appeal Tribunal on the matter. In delivering the judgment, the Judge relied on the provisions of Section 2 of the VAT Act. However, it is necessary to critically evaluate the validity of the Judge’s submissions given the attendant controversies on the applicability of VAT on services and intangibles that are supplied by NRCs to Nigerian companies.

We have examined some of the Judge’s submissions vis-à-vis the relevant provisions of the VAT Act as well as the applicability of the reverse charge mechanism in other jurisdictions in this volume of our newsletter.

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