The commencement of the implementation of Value Added Tax (VAT) is to take effect from February 1, 2020, after all the necessary administrative procedures have been completed, especially the gazette of the Act by the Federal Ministry of Justice
Once a bill is signed into law, it takes effect immediately but it is to note that there are certain administrative procedures and formalities to be finalised before commencement.
Recall the VAT increase which is meant to help government achieve its revenue projections for the 2020 Budget (N8.155trillion) is a part of the tax reforms included in the 2019 Finance Act. With the Act, there will be more revenue to finance key government projects especially in the areas of health, education and critical infrastructure.
Among the Finance Act strategic objectives is the supporting of micro, small and medium Enterprises (MSMEs) in line with the ease of doing business reforms such as VAT threshold.
The Honourable Minister of Finance, Budget and National Planning, Mrs. Zainab Shamsuna Ahmed, had earlier said that: “We planned that, going forward, the annual budget will always be accompanied by Finance Bills to enable the realisation of revenue projections.
“Future Finance Bills will therefore also provide us with additional opportunities to incrementally improve the fiscal policy and regulatory/legal environment in order to further strengthen our domestic capital market, and ultimately ensure sustained and inclusive growth and development.”
Also recall that the Finance Act also takes care of essential palliatives to support MSMEs and mitigate the impact of the VAT rate increase on the most vulnerable businesses, communities and citizens in the economy.
Some of these measures include: Expanding the list of VAT-exempt items (e.g. basic food items, educational materials and medical supplies); Introducing a VAT registration threshold for MSMEs with a turnover of less than N25 million per annum; Reducing the corporate tax rate for MSMEs from 30 percent to 20 percent for Small firms (with turnover of between N25million and N100million per annum.); and exempting micro-firms (with turnover of less than N25million per annum) from payment of CIT
