FIRS Appoints MTN, Airtel and Deposit Money Banks as Value Added Tax (VAT) Collection Agents

The Federal Inland Revenue Service (FIRS) has issued a Public Notice appointing MTN, Airtel, and all money deposit banks (as defined by the Central Bank of Nigeria (CBN) guidelines) as VAT Collection Agents (“VAT agents”), pursuant to its powers under Section 14(3) of the VAT Act (as amended).  Section 14(3) of the VAT Act empowers the FIRS to appoint any person as an agent for VAT collection.

Consequently, effective from 1 January 2023, the appointed VAT agents will be responsible for withholding VAT at source on all taxable supplies made by their vendors and remitting same to the FIRS in the currency of transaction.  Failure to comply with the new directive by the VAT Agents will result in a penalty of 150% of the amount not collected, plus 5% interest above the CBN monetary policy rate as prescribed under Section 34 of the VAT Act.

The FIRS has clarified that the affected suppliers to the VAT Agents can deduct their allowable input VAT from the output VAT collected on other taxable supplies and from future VAT liability.   Finally, the FIRS noted that it has put measures in place to ensure a prompt payment of cash refund if the taxpayer (whose allowable input VAT exceeds the output VAT collected from other supplies) requests a cash refund.


The appointment of companies operating in specific sectors of the economy as VAT agents is not new in Nigeria.  It will be recalled that, in 2007, companies operating in the oil and gas sector were appointed as agents for collection of VAT on all taxable supplies made to them.  It appears that, given the effectiveness recorded with companies operating in the oil and gas industry, the FIRS has extended this obligation to money deposit banks and specific telecommunication companies (Telcos).   The appointment will allow the FIRS to leverage the resources, technology and reach of these companies to improve VAT collection and reduce the incidence of VAT debt while reducing cost of collection.

However, the FIRS failed to consider a situation where the money deposit banks, or the selected Telcos are the only customers of the supplier.  In this case, the supplier will be in a perpetual refund position where it is not able to get its refund as and when due. Therefore, given the potential cash flow impact of the new directive on taxpayers with qualifying input VAT but whose output VAT is withheld at source, it is important that the refund be made within a reasonable period, preferably not more than 21 days.  However, the key question is whether this is feasible based on current experience.  For example, would a special tax audit be a condition precedent before refund will be made or would FIRS rely on the representation of the taxpayers? The Public Notice is silent on this.

Further, it is doubtful, given the revenue challenge faced by the Government, if the dedicated account will receive sufficient funding from the annual Budget to facilitate prompt payment of refunds as promised by the FIRS.  Given the implication on cashflow of affected suppliers, it is important that the FIRS issue guidelines, before the commencement date, to specify the measures put in place to ensure prompt settlement of the refundable input VAT.

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