FIRS’ Updated Guidelines on VAT Filing Procedures on TaxPro Max Portal

June 26, 2023

Summary

The Federal Inland Revenue Service (FIRS) recently issued a Circular to guide the general public, tax practitioners and taxpayers on the Value Added Tax (VAT) withholding regime in accordance with the provisions of the VAT Act Cap VI LFN 2004 (as amended) to provide additional clarity on the operations of VAT in Nigeria and introduce new VAT filing procedures. The FIRS has also released a number of explanatory videos and facilitated stakeholder sessions to provide additional information on the changes introduced. The changes which were scheduled to be effected in April 2023 were met with several stakeholder complaints and challenges. Hence, the FIRS has provided responses to some of the concerns raised by stakeholders as a way to resolve the issues going forward.

Details

The details of the FIRS publication with respect to the ways forward on the updated VAT filing procedures on TaxPro Max portal are provided below:

i. April 2023 returns were to be filed in May 2023 as normal and all disabled columns were enabled for this purpose;

ii. Beginning from 1 June 2023, the following should be uploaded to allow for the input VAT being claimed:

• Purchase Schedule, if claiming input VAT for purchases;
• Withholding VAT (WVAT) Schedule, if claiming input VAT for WVAT;
• Purchase Imports Schedule, if claiming VAT for imports.

iii. The following steps will apply to all input VAT claims from 1 June 2023:

• Step 1: For illustration purposes, 1 June to 30 June transactions are treated as month 1;
• Step 2: The month following the month of transactions, using the above example, to file returns for month 1 transactions will be 1 July to 21 July midnight;
• Step 3: In the month following the month VAT returns were filed, (i.e. 1 August to 31 August, using the example above), Input VAT claims that TaxPro Max is not able to verify, validate and cross-check online, will be manually traced, using the data entered by the taxpayer when filing;
• Step 4: Working concurrently with Step 3:
  • All suppliers that are traced will be required to comply immediately. The unremitted amount will be raised as liability in their TaxPro Max account, with penalty and interests applied and accruing. Audit and enforcement will be triggered in line with threshold of timelines;
  • For suppliers that are not traced, any input VAT claimed by a purchaser whose supplier could not be traced will be disallowed, and the amount will be raised as liability for the purchaser, except the claimant is able to aid the FIRS to locate such supplier within the stated timeline, i.e., from the 1st day to the last day of the month following the month, the VAT return was filed. The FIRS also stated that such claimants should be prosecuted for false claims where the supplier could not be located.

• Step 5: In the month following the month of manually tracing suppliers that TaxPro Max is not able to check online (i.e., 1 September to 30 September, using the example above), all cases of verified claims in the system will be closed.
  • For traced suppliers: Liability will be raised for the supplier and payment will be received
  • – Untraced suppliers: Liability will be raised for the purchaser and payment will be received. Also, prosecution for false claims will be commenced;
  • – Enforcement actions will be commenced on the supplier if payments are not received within the specified timeline.

Implication

While we are aware that the FIRS is taking steps to sensitize taxpayers on the new developments in the administration of VAT in Nigeria, it is still expedient for more efforts to be deployed into creating adequate awareness before the FIRS enforces its compliance deadline.

Although the changes introduced by the FIRS prescribe some administrative restrictions to the right of taxpayers to claim input VAT to reduce their Output VAT, no such restrictions exist under the law and this could create an absurdity where taxpayers will be coerced to pay more VAT than their actual VAT liability. Nevertheless, it is an improvement to the initial position taken by the FIRS to disallow input VAT payable until the supplier remits the output VAT collected to the FIRS.

As the FIRS seeks to explore ways to ensure validity of input VAT claims by taxpayers, the FIRS should address issues raised by taxpayers on TaxPro Max that affect them. For example, the FIRS is yet to create an avenue on TaxPro Max for the recognition of foreign denominated withholding tax credit notes that will enable taxpayers offset the income tax payable. This has become very important as many companies will be required to file their income tax returns by 30 June 2023.

The above notwithstanding, it is important for all taxpayers to liaise with their tax advisers and re-evaluate the impact of these changes and the FIRS directives on the ease of their VAT returns filing and remittance on their TaxPro Max accounts.