The Presidential Fiscal Policy and Tax Reforms Committee has proposed a 0% VAT rate on intellectual property and services as part of a broader initiative aimed at stimulating Nigeria’s export sector.
This proposal is among seven key changes suggested in the new VAT regime designed to overhaul the country’s tax system.
This was disclosed in a statement by the Chairman of the Committee, Taiwo Oyedele via his official X account on Monday, inviting public feedback on the proposals.
Oyedele explained that the proposed VAT regime, which eliminates VAT on the export of services and intellectual property, is intended to enhance Nigeria’s global competitiveness.
This contrasts with the current system, which applies VAT to these exports, thereby increasing their cost and reducing their appeal in international markets.
“Export of services and intellectual properties will attract 0% VAT to facilitate export growth,” a portion of the statement on the proposed VAT regime read.
He also outlined additional key proposals in the new VAT regime.
These include implementing a 0% VAT rate on essential items such as food, education, and healthcare, along with exemptions for rent and transport.
To balance these reductions, the proposals suggest raising VAT rates on non-essential items.
This is in contrast to the current VAT system, where many essential goods, which make up 82% of household consumption, are subject to VAT, with only a few exemptions.
Another significant proposal is the discontinuation of other consumption taxes, leaving VAT as the sole applicable consumption tax.
Currently, some states impose additional consumption taxes alongside VAT, which the new reforms aim to eliminate.
He highlighted that over 97% of small and medium-sized enterprises (SMEs) would be exempt from charging VAT under the new regime.
This move is intended to simplify operations and reduce administrative burdens for smaller businesses, which currently face complexities and higher compliance cost
The proposed reforms also include improvements to the VAT refund process, aiming to speed up refunds and enhance cash flow for businesses.
This contrasts with the current system, where delays in refunds due to extensive audits can hinder business growth.
Furthermore, tax the proposed regime seeks to ensure a fairer distribution of VAT revenue among states, addressing regional imbalances and disputes under the current system.
