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Value Added Tax: The Federal Government expands the list of exempt items

Value Added Tax (VAT) is a form of tax imposed on the supply of all goods and services, save for a list of items provided by the Value Added Tax Act (VATA).

Thus, VAT is required to be deducted by a supplier/provider on all sums payable to a client for the supply of all goods and services, excluding those particularly specified as exempted under the VATA. These items include:

  1. All medical and pharmaceutical products
  2. Basic food items
  3. Books and educational materials
  4. Baby products
  5. Medical services
  6. All exported services etc.

The VATA also empowers the Minister of Finance to amend, vary or modify the exempted list of items, through an Order published in the Gazette.

Pursuant to this power, on the 6thof June 2018, the Federal Executive Council (FEC) approved, amongst tax easing Executive Orders, the Value Added Tax Act (Modification) Order which has been sent to the National Assembly for inclusion in the Value Added Tax Act Amendment Bill.


Implication of the VAT (Modification) Order

According to the Value Added Tax (Modification) Order, the following items are now VAT exempt:

  1. Rent/Lease of residential properties;
  2. Public transport services;
  3. Exemption of exports from VAT will be streamlined to only non-oil exports;
  4. Life insurance policies;
  5. Services rendered by unit Microfinance Banks and Mortgage institutions;
  6. Education and Training conducted by public or Non-profit educational institutions.

All other goods and services not included on the exemption list are liable to VAT, and the supplier/provider of such goods and services will be required to remit the tax payable to the relevant tax authority.



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