Businesses With Less Than N25m Turnover Are Now VAT Exempt
According to Ben Akabueze, Director General of Nigeria’s federal budget office, the new 7.5% Value Added Tax (VAT) being proposed by government will only apply to businesses with turnover of N25 million and above.
At a closing press session of the just concluded 25th Nigerian Economic Summit in Abuja, Akabueze also noted that the finance bill which President Buhari will present to the National Assembly on Wednesday has exempted some critical consumables from the VAT hike.
According to him, “the question of increasing the VAT rate in Nigeria is a matter that has been long settled in past summits about the necessity to increase and improve taxation through consumption taxes.
“Indeed, about 9 years ago that was supposed to have happened. Two things were supposed to happen simultaneously were VAT increase from 5 to 10 percent and a reduction in personal income tax rate.
“One important thing to know is that VAT is a consumption tax, and the truth is the generality of the poor and vulnerable Nigerians have very minimal engagement with VAT, because they hardly consume or engage with the platform where VAT is chargeable.”
He said the proposed increase also came with an exemption list, which includes certain basic commodities like food, education, medicines.
Explaining further, Akabueze noted that the existing VAT law has no threshold for applicability, “which means even the woman on the road side is supposed to be charged VAT, but this new act has established a threshold which says it shall be applied to only businesses with a turnover of over N25 million and above, so small businesses are exempted”.
Call 0803 239 3958 for free financial consulting advice for your businesses.
Send your accounting articles to firstname.lastname@example.org.
READ ALSO! PAYE: How to calculate personal income tax
READ ALSO! Is N-Power Truly Empowering Nigerian Youths?