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Nigeria: VAT on satellite-network services provided by non-resident company

Nigeria: VAT on satellite-network services

The Court of Appeal today affirmed a decision of the Federal High Court concerning value added tax (VAT) imposed on satellite-network bandwidth capacities when provided outside Nigeria by a Netherlands-based non-resident company.

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The case is: Vodacom Business Nigeria Ltd. v. Federal Inland Revenue Service (24 June 2019)

The Federal High Court adopted a “destination principle” for imported services to determine what was subject to VAT in Nigeria. The judgment was viewed as a significant departure from the conventional practice of VAT being based on the “origin principle.” The destination principle provides that VAT is applicable in the territory where the goods and services are consumed—whereas, under the “origin principle,” VAT is applied in the territory where the goods or services are produced.

KPMG observation

An implication of the Court of Appeal judgement is that Nigerian companies conducting business with companies outside Nigeria may be required to self-account for VAT with regard to these transactions and notwithstanding the fact that the services were provided outside Nigeria and whether or not the service provider charged VAT in the invoice.

 
Read a June 2019 report [PDF 152 KB] prepared by the KPMG member firm in Nigeria

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