The Federal High Court, Lagos ("FHC") has revoked the decision of the Tax Appeal Tribunal ("TAT") in Gazprom Oil and Gas Nigeria Limited (Gazprom) v. Federal Inland Revenue Service (FIRS) relating to services which Gazprom received from a non-resident company. In Nigeria, the interpretation of destination and source principles of international taxation keeps swinging. Will there ever be an end?

1. The pendulum of VAT on imported services
September 2018

2. Country-by-Country Reporting Regulations, 2018
Nigeria
Outline
Overview
How the appeal process works: Brief insight on TAT
Should the Nigerian entity be accountable for VAT on imported services?
- Taxable goods and services
- Registration for VAT by non-resident company
- FHC’s position
Conclusion
2018. The pendulum of VAT on imported services

3. Overview
The Federal High Court, Lagos ("FHC") has revoked the decision of the Tax Appeal Tribunal
("TAT") in Gazprom Oil and Gas Nigeria Limited ("Gazprom") v. Federal Inland Revenue
Service ("the FIRS"). Gazprom received consultancy services from a non-resident company.
2018. The pendulum of VAT on imported services 1
Initially, the TAT held that a non-resident
company that is not carrying on business in
Nigeria is not obliged to register, charge or add
VAT on its invoices. However, the FHC ruled
that Gazprom should self-charge and remit the
VAT on imported services.

4. How the appeal process works

5. Tax Appeal Tribunal
The Tax Appeal Tribunal (TAT)
● is an administrative body established by Section 59 (1) of the Federal Inland Revenue
Service (Establishment) Act, 2007 (FIRSEA)
● resolves tax disputes between tax authorities and taxpayers in Nigeria
2018. The pendulum of VAT on imported services 3
4
Regulations or rules
and other laws
passed by the
National Assembly
2
Personal Income
Tax
Value Added Tax
1
Companies Income
Tax
Petroleum Profit
Tax
3
Stamp Duties
Tax and Levies
(Approved List for
Collection)
Some tax legislations covered

6. To appeal? ….Yes!
2018. The pendulum of VAT on imported services 4
Step 3
An appellant may appear
for himself in proceedings*
or be represented by a
Counsel, Chartered
Accountant/Advisor.
Step 1
A taxpayer receives a tax
assessment or Notice of
Refusal to Amend (NORA)
from the FIRS or any of
the State Boards of
Internal Revenue (SBIR)
Step 2
An aggrieved taxpayer may
appeal to TAT within 30
days of receiving a tax
assessment or NORA.
However, TAT may extend
this timeframe if there was
adequate reason for the
delay.
*Next appeal goes to the Federal High Court and then higher courts

7. Should the Nigerian entity be accountable for
VAT on imported services?

8. Value Added Tax (VAT)
Value Added Tax is
➔ a consumption tax on the supply of all goods and services.
➔ payable on all foreign and local supply of goods and services .
2018. The pendulum of VAT on imported services 6
Exemptions
Not granted to individual, business, or government
agency.
Rather, the First Schedule to VAT Act lists certain
goods and services that are exempted from VAT.

9. Non-resident company
Definition
A non-resident company is a company incorporated under foreign
laws.
Basis of taxation A non-resident company that carries on business in Nigeria shall
register for VAT with the Federal Inland Revenue Service, using the
address of the Nigerian customer for tax correspondence.
VAT obligation A non resident company shall include the tax in its invoice and the
person to whom the goods or services are supplied in Nigeria shall
remit the tax in the currency of the transaction.
2018. The pendulum of VAT on imported services 7

10. Imported services
Imported services are services rendered in Nigeria by a nonresident person to a person inside
Nigeria.
In essence, a non-resident company renders services to a company inside Nigeria but does
not have a physical presence in Nigeria, the NRC is not required to register for VAT with the
FIRS or charge/issue a VAT invoice.
2018. The pendulum of VAT on imported services 8
❗

11. FHC’s position
When a foreign company provides service to a Nigerian company*,
➔ and the foreign company fails to register for VAT in Nigeria, then the Nigerian company is
expected to register the non-resident company with the FIRS. The Nigerian company
would be held liable for VAT on imported services.
➔ the foreign company is required to register for VAT in Nigeria and charge VAT on invoice
issued to the Nigerian company. Thereafter, the Nigerian recipient is expected to withhold
and remit VAT to the FIRS.
*The concept of “carrying on business” seems irrelevant
2018. The pendulum of VAT on imported services 9

12. Conclusion
In Nigeria, the application of Destination and Source principles of international taxation appear
as a pendulum that swings in any direction. It is important that the Nigerian VAT legislation is
amended to reflect a unified position on VAT of imported (and exported) services. Overall,
unambiguous tax laws would help businesses to make informed decisions on their Nigerian
operations.
2018. The pendulum of VAT on imported services 10

13. 2018. The pendulum of VAT on imported services 11
FHC’s pronouncement could
heighten the risk of FIRS
imposing VAT on imported
services consumed by a
Nigerian company. A Nigerian
company dealing with a
non-resident company should
evaluate and mitigate this risk
on a timely-basis.

14. Thank you!
For further discussion, please contact
Maureen Omodiagbe
maureen@bomesresourcesconsulting.com
www.bomesresourcesconsulting.com
Stay in touch with us
@bomesresourcesconsulting