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Court of Appeal’s judgement on the applicability of VAT to services provided outside Nigeria by a non-resident company

Court of Appeal’s judgement on the applicability of VAT

The Court of Appeal (COA) in its judgement delivered today Monday, 24 June 2019 upheld the decision of the Federal High Court (FHC) in Vodacom Business Nigeria Limited (“Vodacom”) and Federal Inland Revenue Service (FIRS) on the applicability of value added tax (VAT) to satellite-network bandwidth capacities provided to Vodacom outside Nigeria by New Skies Satellites, a Netherlands-based non-resident company.

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Wole Obayomi

Partner & Head, Tax, Regulatory & People Services

KPMG in Nigeria

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Court of Appeal’s judgement on the applicability of VAT to services provided outside Nigeria by a non-resident company

The FHC’s judgement which adopted the “destination principle” for imported services to determine what was liable to VAT in Nigeria, was a significant departure from conventional practice where VAT was based on the “origin principle”. The destination principle holds that VAT is applicable in the territory where goods and services are consumed while under the origin principle, VAT is applicable in the territory where they are produced.

The implication of the COA judgement is that Nigerian companies carrying on business with other companies outside Nigeria would be required to self-account for VAT on their transactions notwithstanding that the services were provided outside Nigeria, and regardless of whether the service providers charged VAT in their invoices.

We will issue a detailed newsletter on this judgement in due course.

For any enquiries or feedback on the above, please contact:

Wole Obayomi

ng-fmtaxenquiries@ng.kpmg.com

© 2019 KPMG Professional Services, a partnership registered in Nigeria and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. All rights reserved.

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