COA Upholds FHC’s Decision On The Applicability Of VAT To Services Provided Outside Nigeria

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Monday, June 24 2019  05:23 PM / KPMG Nigeria, Wole Obayomi / Header Image Credit: Pulse.ng

 

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. 

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.

 

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