COMMISSION ON STOCK MARKET TRANSACTIONS NOW EXEMPTED FROM VAT

COMMISSION ON STOCK MARKET TRANSACTIONS NOW EXEMPTED FROM VAT

credit – theeagleonline.com.ng
  Introduction
 The Value Added Tax Act (“VAT Act”) has been amended to exempt commissions on capital market transactions from VAT through the Value Added Tax (Exemption of Commissions on Stock Exchange Transactions) order 2014 (Order). The Order was published in a gazette dated 30 July 2014 and signed by the Coordinating Minister for the Economy and Honorable Minister of Finance. This is in line with the VAT Act which empowers the Minister to amend, vary or modify the VAT exemption list in the First Schedule to the VAT Act.

This further supports the government’s commitment to the development of the capital market since the issue of the Companies Income Tax (Exemption of Bonds and Short Term Government Securities) Order, 2011 and the Value Added Tax (Exemption of Proceeds of the Disposal of Government and Corporate Securities) Order, 2011.
The Exemption
The following commissions are exempted under the new order:
  • Commissions earned on traded value of the shares,
  • Commissions payable to the Securities and Exchange Commission (SEC),
  • Commissions payable to the Nigerian Stock Exchange (NSE); and
  • Commissions payable to the Central Securities Clearing System (CSCS)
credits – theeagleonline.com.ng
Commencement date and duration of the Exemption
The commencement date of the Order is 25 July 2014 and would be in force for five years from the date of commencement. This means that the exemption would expire on 24 July 2019 unless it is further extended by the Minister. Given that the Exemption Order was not made public on time, any VAT already paid on the exempt transactions should be claimable via adjustments in subsequent VAT returns.
Economic effect of the Exemption
VAT is an indirect tax and therefore it is borne by the final consumer. In relation to capital market transactions, any VAT charged on commissions was passed on to issuers and investors as the case may be. Given that VAT on services is not claimable, the cost is borne by the payer. With this exemption, it is expected that capital market transaction costs will benefit investors. The removal of VAT is expected to bring down the average cost of transactions on the stock market to about N24 .7 million on daily basis. For instance, for five day trading ended  on the 2 October 24, 2014, total volume of transactions exchanged on the exchange was 1,412,69,835 shares. So, averagely, on daily basis, NSE records 282,593,967 shares, indicating that investors pay about N24.726 million as VAT for selling their shares. The exemption would also reduce compliance costs for operators such as stockbrokers and the regulators in accounting and remitting VAT to the Federal Inland Revenue Service (“FIRS”).
Conclusion
The purpose of the exemption is to encourage more trading in securities and ultimately reduce the cost of transactions for investors, and encourage investments in the Nigerian capital market. However, it is expected to be in force for five years. Investors can therefore take advantage of the exemption.

By: Sogo Akinola
Sogo Akinola Nathan is
a young commercial lawyer at GbengaBiobaku and co. He specializes in Taxation,
oil and gas law and Real Estate. He is a graduate of ObafemiAwolowo University
and the Nigerian Law School. He is a member of the Nigerian Bar Association and
a member of the Association of Young International lawyers and  Young International Arbitration Group and also
an intending associate member of the Chartered Institute of Taxation of Nigeria

LEGAL HURDLES OF REGISTERING BUSINESS IN NIGERIA: TAX PERSPECTIVE

LEGAL HURDLES OF REGISTERING BUSINESS IN NIGERIA: TAX PERSPECTIVE


Credits: fearlessforlife.com

Nigeria is a developing economy
and an economy which recently overtook South Africa to become the continent’s
largest economy following the recalculation of GDP and the world’s 26th largest
economy, the economy attracts foreign investors and local investments. An
entrepreneur plays an important role in economic growth and development and
there is an impressive rise in the number of self-employed individuals we have
in the country today, former American President – Ronald Reagan 1986 address to
the White House Conference on Small Business said, “the government’s view of
the economy could be summed up in a few short phrases: If it moves, tax it” as
the economy is moving its crystal clear the government will become stricter
with tax policies. Most entrepreneurs or intending entrepreneurs do not know
the basics of taxation have regards starting business in the country and will
be found wanting by the law.

Registration of business with
Federal Board of Inland Revenue Department of the Ministry of Finance for
income tax and VAT
.
(FIRS) requires that an applicant
who seeks registration for Income tax and VAT completes tax registration forms
for corporate income tax registration as well as VAT. The applicant submits an
application letter to the tax authority for a tax clearance certificate and,
for income tax purposes, registers at the integrated tax office. The
registration process requires submitting a completed tax office–issued
application (taxpayer registration input form, TRIF/2006/001 COYS) and the following
documents:
1) Completed FIRS questionnaire
 2) Memorandum and articles of association
(copy)
 3) Certificate of incorporation (copy)
 4) Directors’ names and addresses
 5) Tax advisor’s name and address
 6) 
Letter of appointment of a tax adviser and corresponding letter of
acceptance
 7) The date the company commenced business
And for larger companies:
 i) Names, addresses and mobile numbers of
major promoters and the chairman of the company, including their email
addresses
 ii) Other sources of income of the chairman
and the promoters of the company
 iii) Name and addresses of the principal
officers of the company including the chairman, managing director, legal
adviser and accountant
To register, the company must
submit the taxpayer registration input form in triplicate, and the original
certificate of incorporation must be presented for review by the controller.
Upon the completed taxpayer registration input form and all other documents
being received, a tax reference number is allocated. An application must be
filed for the tax clearance certificate; its issuance is not automatic.
There are Fee schedule for tax
clearance certificate:
 • Registration within 6 months of
incorporation: no cost will be incurred on this.
 • Registration after 6 months of incorporation
this will attract:
1. A pre-operation levy of NGN 20,000 for first-year
requests and NGN 25,000 for each subsequent year request, until the company
files a notice of commencement of business as per amendment to section 29 of
the Companies’ Income Tax Act No. 11 of 2007.
2. Companies that register after the start of operations
must file a set of audited accounts. TCC is issued based on tax paid for 3
years. If the position is at a loss, the TCC will be issued to reflect the
position.
Companies required to register for VAT
complete the VAT registration form VAT Form 001, which is obtainable free of
charge from all FIRS offices and return it to the integrated tax office, which
will issue a taxpayer identification number . Companies required to register
for VAT must do so within 6 months from the date of starting business
operations. Since the registration for corporate income
tax and VAT are done in the same place; 1 Tax Identification Number (TIN) is
issued to companies for all federal taxes. 
 Registration of personal income tax PAYE at
the State Tax Office
Employers shall register with the relevant
state tax authority for income tax withholding. Once the application is filed,
with a copy of the certificate of incorporation attached, a reference file is
opened for the company. It is safer to adhere to the law
than face its wrath, and adequate compliance to the tax authorities puts the
mind of an entrepreneur at rest.

BY: Sogo Akinola
Sogo Akinola
Nathan(sogoakinola@gbc-law.com) is a young commercial lawyer at Gbenga Biobaku
and co. He specializes in Taxation, oil and gas law and intellectual property.
He is a graduate of obafemi awolowo university and the Nigerian law school
lagos campus. He is a member of the Nigerian bar association and a member of
the Young International Arbitration Group and also an intending associate
member of the Chartered Institute of Taxation of Nigeria.