What You Need To Know About Rivers State Value Added Tax Law
Rivers State Governor Barr Nyesom Wike on the 19the of August 2021 enacted the Rivers State Value Added Tax Law, which provides for the imposition and administration of value added tax (VAT) in Rivers State. The Value Added Tax Law No.4 of 2021 imposes 7.5% VAT on the supply of taxable goods and services, except those that are exempt under the annex to the law.
The Rivers State Internal Revenue Service (RSIRS) is empowered by law to administer, implement, evaluate, collect and account for the money collected. This follows the Federal High Court, Port Harcourt Division ruling on Monday August 9, 2021 in the Rivers State Attorney General‘s case against FIRS and Federation Attorney General Suit No FHC / PH / CS / 149/2020 which issued an Order Notice prohibiting the Federal Inland Revenue Service (FIRS) from collecting VAT and Personal Income Tax (IRP) in Rivers State.
Some notable provisions of the law are highlighted below:
- A taxable person under the law is required to register with the Council within 6 months of the entry into force of the law or within 6 months of the start of the activity, whichever comes first.
- Registration for VAT under the law is a condition for obtaining a contract with a government ministry, agency or body.
- A non-resident company that operates in the state must register for tax with the Council using the address of a person with whom it has a current contract. The NRC must include the tax in its invoice while the remittance must be made by the person to whom the goods or services are provided in the state in the currency of the transaction.
- Refusing to register for tax within the time limit is a punishable offense.
- Section 16 (20) requires payment of tax on taxable imported goods prior to customs clearance.
- When a person does not agree with the assessed amount, they can object to the RSIRS. The appeal against the Council’s position is to the Tax Appeal Board and another appeal is to the State High Court. It is not known what will happen to the appeals pending the establishment of a State Tax Appeals Commission.
- Article 15 stipulates that the tax must be paid no later than the 21ststnext day of the month.
- The annex to the law exempts the following goods and services from paying VAT:
- All medical and pharmaceutical products
- Staple foods
- Books and educational material
- Baby products
- Fertilizers, locally produced agricultural and veterinary drugs, agricultural machinery and agricultural transport equipment.
- All exports
- Facilities, machinery and goods imported for the use of the company are for export, otherwise, the tax will accumulate proportionately on the profits of the company.
- Plant, machinery and equipment purchased for the use of gas in downstream petroleum operations.
- Tractors, plows and agricultural implements and tools purchased for agricultural purposes.
- Medical services.
- Services provided by Community Banks, Micro Finance Banks and Mortgage Institutions.
- Pieces and performances produced by educational establishments as part of the apprenticeship.
- All services exported
- The state government will receive 70% of the revenue while 30% will go to local governments.
- There is no exemption for small and medium-sized enterprises with a turnover of less than 25 million naira, as is possible in the federal law on VAT as amended.
The Institute notes that the FIRS is currently appealing the judgment in the above-mentioned case which led to the enactment of the Rivers State VAT Act. It would be premature to take a position at this stage given the fact that the case is still before the Court. One thing we do know is that the outcome of the case would have a huge impact on the administration of VAT in Nigeria.
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