• Business - Companies
  • Updated: September 21, 2020

Tax Tribunal Rules Against FIRS' Plan To Demand VAT On Rent

The Federal Inland Revenue Service (FIRS) has lost its bid to monetise rent after a tribunal ruled against the tax administrator. FIRS had stated that Value Added Tax (VAT) is applicable to rent, but its directive was dragged to the Tax Tribunal.

While FIRS stated that residential rent is not subject to VAT, the tax authority claimed that rent for operational usage or business will be VAT deductible - this submission set FIRS against companies, and the tax administrator, led by Muhammad Nami, was dragged to the Tax Appeal Tribunal.

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The Tribunal ruled that the directive of FIRS was wrong as VAT isn't applicable to rent for commercial purposes. The ruling was given in a suit between Essay Holdings Limited and FIRS. With the ruling, the tax agency doesn't have the authority to demand for VAT on operational rent.

The Tribunal ruling was given on September 10, 2020. AllNews gathered that "The Tribunal held that lease of real property, whether for commercial or residential purpose, does not amount to supply of goods and services. This relates to incorporeal property rights, which is outside the scope of the VAT Act," Tax and Finance Expert, Omotolani Olaoluwa, disclosed.

FIRS Quest To Squeeze Revenue Out Of Rent

AllNews had reported that the FIRS placed stamp duty on rent for residential or commercial purposes, different from the VAT. It was revealed that the stamp duty charge will be paid by the tenant, but will not be applicable on renewal of rent or lease only on new agreements.

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Nami disclosed that six percent is only for rent or lease above 21 years. He said Nigerians renting apartments or other buildings will only have to pay 0.78 percent stamp duty on their yearly rent. Meanwhile, three percent charge will be done on any rent agreement that falls between 7 and 21 years.

He said Nigerians must see payment of stamp duty as a patriotic act for the development of Nigeria, regardless of the discomfort it causes, “there is never a time when taxation is convenient for everybody to pay,” Nami said, adding that tax payment is “a patriotic duty to our dear country, Nigeria."

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Olalekan Fakoyejo
Olalekan Fakoyejo

Fakoyejo Olalekan is a certified media practitioner from the Nigerian Institute of Journalism (NIJ)....

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