The Federal Inland Revenue Service (FIRS) recently informed the general public that it has commenced the issuance of Value Added Tax (VAT) certificates to all taxpayers registered for VAT collection purpose.
The FIRS also mandated VAT collectors to display the VAT certificates at their business premises and required taxpayers to report VAT collectors who fail to adhere to this directive.
The FIRS had prior to 2017 issued VAT certificates to taxpayers registered for VAT as at then. The FIRS, however, discontinued this practice upon implementation of the integrated tax registration system, whereby taxpayers are issued a tax identification number (TIN) which serves as evidence of registration for all types of tax collectible by the FIRS.
We understand that the reintroduction of the VAT certificate by the FIRS is with a view to identifying delinquent taxpayers who have either failed to register for VAT or who, being registered, have failed to remit the VAT collected to the FIRS. It is, however, uncertain the extent to which the FIRS’ directive can achieve the desired objective, given that a mere display of VAT certificate does not necessarily imply compliance with remittance of VAT. Equally, failure to obtain and display a VAT certificate is not a conclusive proof that a taxpayer has failed to register for VAT.
The FIRS may, however, adopt more effective approaches to monitoring VAT compliance and achieving its objectives stated above. One approach is for the FIRS to maximize the functionality of its existing online TIN verification portal through which taxpayers (customers) can verify the tax registration status of their vendors before doing business with them. The FIRS could also compare the data of entities registered with the Corporate Affairs Commission (and other government parastatals) vis-à-vis its tax database to identify entities operating without TINs (i.e. those not registered for taxes). The FIRS may subsequently assess the VAT compliance of registered taxpayers via statutory tax audits or other similar exercises.
Meanwhile, as required by the FIRS, registered taxpayers without VAT certificate will be well advised to apply for, and obtain their VAT certificate from the FIRS to be compliant.
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