The Federal Inland Revenue Service (FIRS) has revealed that a value-added tax (VAT) rate of 7.5% will be applied to items that were previously excluded from building-related charges. The new measure is set to take effect from September 1, 2023, as detailed in a public notice released on Friday, signed by Muhammad Nami, the executive chairman of FIRS.
The revenue agency clarified that certain items that were previously considered separate from building structures will now be subject to the 7.5% VAT. These items include radio and television masts, transmission lines, cell towers, mobile homes, caravans, and trailers.
FIRS explained that this change is in accordance with the provisions outlined in the Finance Act of 2023. The Act initially designated May 1 as its commencement date, but this was subsequently postponed to September 1. The alteration pertains to the definition of “building” in Section 46 of the VAT Act. The amended definition explicitly excludes fixtures or structures that can be easily removed from the land.
The notice from FIRS clarified, “As such, all the items removed from the definition of land have become chargeable to VAT. Companies letting, trading in, or providing services with such items must charge VAT at the prevailing rate with effect from 1st of September, 2023.”
Furthermore, the FIRS revealed that there has been an adjustment in the rate of tertiary education tax (TET). The new rate has been set at three percent of assessable profits.
The move to extend VAT to previously excluded building items is expected to generate additional revenue for the government and contribute to the country’s ongoing fiscal policies. However, it could also prompt adjustments in pricing and financial strategies for businesses operating in sectors that involve these items.