Provisions of Finance Act, 2019 on Registration as a VAT Collection Agent

#TaxNuggets by Victor Osolake & Co.

Sections 8 and 32 of Value Added Tax Act, CAP V1, LFN 2004 provided that every taxable person shall register under the Act within six months of commencement of business and that failure to do that will result in:

a) a penalty of N10,000 in the first month of default (that is, by the 7th month of commencement of business);

b) a penalty of N5,000 for every month in which the default continues (that is, N5,000 penalty every month from the 8th month of commencement of business until you comply);

c) a fine of N5,000, upon successful conviction; and

d) sealing up of business premises, if the person is still NOT registered within one month of conviction.

However, sections 35 and 43 of the Finance Act, 2019 amended the above provisions as follows:

Registration should be done upon commencement of business. This effectively removes the six months of grace granted by the old provision. In addition, it provides penalties for non-registration as follows:

a) a penalty of N50,000 for the first month of default;

b) a penalty of N25,000 for every month in which the default continues;

However, unlike the old provision, the charge of N5,000 fine upon conviction and sealing up of business premises have been removed.

Note: Possession of tax identification number (TIN) is not necessarily sufficient proof that VAT registration has been done. This is especially true now that TIN is auto-generated at the point of business registration.

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