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Tuesday 10 September 2024

Nigeria: Proposed VAT Reforms to Introduce 0% Tax on Intellectual Property and Service Exports


The Presidential Fiscal Policy and Tax Reforms Committee has unveiled a proposal to implement a 0% VAT rate on intellectual property and service exports as part of a broader effort to boost Nigeria's export sector.

Taiwo Oyedele, Chairman of the Committee, announced the proposed changes on Monday via his official X (formerly Twitter) account, encouraging public feedback. The reform aims to make Nigerian services and intellectual property more globally competitive by eliminating VAT charges, which currently make these exports more costly and less attractive on the international market.

“Export of services and intellectual properties will attract 0% VAT to facilitate export growth,” Oyedele noted in the announcement.

The proposal is part of seven key reforms aimed at overhauling the country’s VAT system. Other significant changes include zero VAT on essential goods such as food, education, and healthcare, as well as exemptions for rent and transportation. Non-essential items, however, may see higher VAT rates to balance out these reductions.

The reform package also calls for the elimination of additional consumption taxes imposed by states, leaving VAT as the sole applicable consumption tax. Oyedele highlighted that over 97% of small and medium-sized enterprises (SMEs) would be exempt from VAT obligations, reducing compliance burdens and encouraging growth.

Another key feature of the reform is the streamlining of VAT refund processes to improve cash flow for businesses, removing the need for lengthy audits that currently cause delays. Additionally, the proposal addresses regional imbalances in VAT revenue distribution, seeking a more equitable sharing model among states to resolve ongoing disputes.

These reforms, if implemented, aim to create a more efficient and business-friendly tax environment, boosting Nigeria’s competitiveness on the global stage.

However, only time will tell how the reform will affect the economy of the country.

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