Small business owners commonly ask whether or not they should register for VAT. This is a very important question because the governments at both the Federal and State levels are currently on an aggressive tax drive to increase their revenue base. The operation of a tax law is universally administered. Every person (Corporate or Individual) is a taxable entity no matter how, when and what method is used to conduct business.
Value added tax (VAT) is a type of consumption tax that is placed on a product whenever value is added at a stage of production and at the final sale or on a service when the service is rendered. It is an indirect tax on domestic consumption of goods and services except for those that are zero rated (such as food and essential drugs, books and educational material, newspaper and magazines) or are otherwise exempted (such as export). VAT is charged on consumers based on the purchase price of certain goods and services. Under the Nigerian law, VAT is charged at 5% of the value of the taxable goods and services.
WHO SHOULD REGISTER FOR VAT
Every taxable person (companies or individual) doing business in Nigeria should register for VAT as soon as it is incorporated or as soon as it commences business. Non-resident company that carries on business in Nigeria should also register for Value added tax (VAT) using the address of the person with whom it has a subsisting contract, as its address for purpose of correspondence relating to the tax. A non-resident company should include Value added tax (VAT) on its invoice and the person to whom the goods and services are supplied in Nigeria will remit the tax in the currency of the transaction.
Non registration for VAT attracts a sanction under the value added tax act of Nigeria. According to section 32 of the act, a taxable person who fails to register is guilty of an offence and liable on conviction to a fine, and if after a month, the person is not registered, the premises where the business is carried on shall be liable to be sealed up.
WHEN SHOULD A TAXABLE PERSON REGISTER FOR VAT
Every business must register for VAT with the FIRS within 6month of commencement of business in accordance with the value added tax act.
A business or organization which has registered for VAT is classified as a “registered person” and is obliged to keep records and books of all transaction, operations, import and other activities relating to taxable goods and services as are sufficient to determine the correct amount of tax due and the registered person as to make regular VAT returns to the appropriate board. Once a business is VAT registered it can charge VAT on goods and services sold to customer and also reclaim VAT charged on goods and services purchased for the business from other business, suppliers etc. VAT registration is therefore an important part of your business.
At INCE Consulting Limited, it is our responsibility to be of immediate assistance to you and your Organization on how you could resolve all your tax issues without disruption to your business.
We are the best business support service partner you can get.
Contact us at info@inceconsulting.com to get expert help.
