VAT – Value Added Tax!!! Those words alone strike fear into the hearts of business owners. Questions such as am I already owing, how do I pay and how often do I need to pay? These are some of the first things that come to mind so here’s the breakdown.
First off, the newly introduced VAT Threshold introduced by President Buhari recently limits those liable to pay VAT to those whose business earn ₦25 million and above per year (yup the big guys) this simply means if your business doesn’t generate up to 25 million in a year, you are not YET liable to pay VAT. You still have to pay your other taxes though.
Secondly, for you to deduct V.A.T from your clients, you have to have first registered with the Federal Inland Revenue Services (FIRS) to be liable to receive VAT from your clients AND very importantly remit this V.A.T to the government.
Don’t get it twisted, the fact that you don’t charge your clients VAT doesn’t mean you won’t pay V.A.T for services that require them to remit V.A.T to the government
Which brings you to the next question of how do I know if I’ll make 25 million in a year? Well, there’s something called anticipatory VAT, yup. So let’s imagine you have a signed contract that will bring you revenue over the ₦25 million within a fiscal year period then you may as well register for V.A.T.
But if the future is still well cloudy and you just don’t know yet then there’s a moving average of 3 months to ascertain if by your turn over you may just hit the ₦25 million mark within that year period.
So, folks, I hope this helps clear the ambiguity, watch this video for details and *spoiler alert* all you need to know about the 2020 Budget from the expert.
