Have you ever tried to play smart and ended up regretting? Chances are you have. Well that is exactly what it feels like when you fail to remit your taxes by the due date, and it comes biting back.
Value Added Tax (VAT) is a flat rate levied on taxable goods and services. This flat rate of tax is levied and collected on taxable goods and services at each stage of production, but the final consumer bears the burden of compliance. It is noteworthy that not all goods and services can be taxed for VAT as Schedule (1) of the VAT Act provides a long list of goods and services exempt from VAT.
There are two kinds of VAT – INPUT VAT and OUTPUT VAT. The Input VAT is the tax paid to suppliers when we pay for taxable goods and services. Output VAT is the tax we receive when customers pay us for taxable goods and services. Input VAT should be used to offset the Output VAT and only the balance remitted to the Government. However, this excludes the VAT we pay relating to overheads, services and administration cost.
Eligible Taxpayers are expected to remit and file their monthly VAT with the Federal Inland Revenue Services (FIRS) not later than the 21st day of the month following vatable transactions.
Penalties for Non-Compliance
Regarding COVID-19, the FIRS has not issued any publication to avert the penalty for non-compliance. In fact, the Finance Act 2020, increased the penalty for late filing to ₦50,000 in the first month of default and ₦25,000 in subsequent months. The penalty for late remittance of VAT will also apply at 10% of the amount not remitted + interest at the prevailing central bank of Nigeria minimum rediscount rate.
So for example, if your VAT in any month is ₦50,000, defaulting to make payment in the first month would be the ₦50,000 (VAT) + ₦50,000 (PENALTY) + (10% + Bank interest rate of VAT) alone and subsequent months will attract ₦25, 000.
Would you really want to pay all that? I guess, NO.
We hope you now see. The cost of DEFAULTING on VAT payments is significantly higher than the cost of you complying. “If I had known” – should not be the story you should tell in 2021 with your VAT payments and remittances. At ikOOba, we take the stress off you so that you can focus on your core business operations, while we ensure that all your tax obligations are met. We offer you a better way of complying with taxes and we provide management and advisory services from seasoned and experienced tax professionals.