Nigeria: No VAT on reimbursable expenses

Nigeria: No VAT on reimbursable expenses

The Tax Appeal Tribunal (Lagos) held that the taxpayer on billing a non-resident affiliate for reimbursable expenses at a mark-up of 12%, correctly applied value added tax (VAT) to the mark-up portion only because Nigeria’s VAT law only imposes tax on the supply of goods and services, and not on reimbursable expenses.

Related content

The case is: Brasoil Oil Services Company Nigeria Ltd. (2 June 2016)

Summary

At issue was whether the taxpayer was required to charge VAT on costs it incurred on behalf of a non-resident affiliate (i.e., reimbursable expenses). The taxpayer billed the non-resident affiliate for the reimbursable expenses at a mark-up of 12%, and applied VAT to the mark-up portion only. Because the VAT law only imposes tax on the supply of goods and services, VAT did not apply to reimbursable expenses given that such costs did not constitute supply of goods or services. The Federal Inland Revenue Service, however, took the position that the entire invoice amount was subject to VAT. 

The tribunal agreed with the taxpayer and directed the revenue authority to withdraw the VAT assessment in this case.

 

Read a June 2016 report [PDF 60 KB] prepared by the KPMG member firm in Nigeria

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