The Federal Inland Revenue Service (FIRS) has hinted in the introduction of 5% tax for online purchases.
According to the Chairman of the revenue service, Mr Tunde Fowler in an interview with newsmen in Abuja, FIRS will ask banks from next year, to charge customers five per cent Value Added Tax for online purchases when using bank cards.
Although he admitted that Nigeria was not fully ready for the growing global digitalised economy, he said that the country will adopt a solution suitable to her peculiar circumstance based on existing laws.
Online transactions have been on the steady increase in Nigeria with the growing number of e-commerce platforms like Jumia and Konga.
“We will address the issue of the digitalised economy very soon. There is no global solution to a digitalised economy.
“Different countries have taken different solutions to address the problem. Nigeria has not taken a position yet. But, we are meeting to see if we can come up with a global solution that we can all adapt to.
“With the existing laws in Nigeria, we can appoint the banks as agents. First of all, all those who make payments for purchases online using bank cards and instruct their bankers to pay, we will tell the banks that, going forward, everyone who gives instructions for service for purchase online, they should deduct five per cent VAT,” he said.
“We are thinking that maybe early next year, we will advise banks to start deducting five percent VAT for all online purchases done locally,” he added.
However, Andersen Tax opines that “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.”
It adds that, “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/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/services.”
“Another critical issue is how the banks are expected to determine VATable transactions and the mode of calculating and imposing VAT on the goods and services supplied online. The law allows a supplier of goods and services to make the necessary adjustments between the output VAT and input VAT before computing the VAT on the product supplied. As such, it would be absurd to mandate banks to make arbitrary deductions on the basis of output VAT.”
