RE-APPRAISING THE LEGAL FRAMEWORK FOR IMPOSITION AND COLLECTION OF VALUE ADDED TAX ON CROSS BORDER TRANSACTIONS IN NIGERIA

Abstract

A transaction will generally be considered a ‘cross-border' transaction where parties are not all located in the same jurisdiction and/or where the governing law of the transaction documents is different from the nationality or jurisdiction of parties. Cross border taxation focuses on the laws which have been put in place by a country for the levying of tax on the inbound and outbound transfer of goods and services in its own jurisdiction. In Nigeria, the law governing and regulating such transactions is the Value Added Tax (Amendment) Act 2007 and Value Added Tax amendments contained in the Finance Act, 2019 and 2020. VAT is imposed and collected on the value added at each stage in the production and distribution of a good or service. It is, in effect, levied on the difference between the sales and production inputs of a business. It is charged at 7.5% on supply of goods and services in Nigeria. Cross-border transactions come with many challenges which impact current VAT rules and systems negatively and expose serious shortcomings and difficulties in their proper interpretation, compliance and administration. The principal deficiency in modern VAT systems is their inability to levy VAT on affected transactions as many VAT rules were designed only taking into account national economic activities and not international activities. Many cross-border trading activities may potentially fall outside of the tax net thereby generating uncertainty and consequently, litigation. This paper primary focus is the reduction of cross-border tax obstacles by improving the VAT rules governing cross border arrangement. It is therefore intended in this work to appraise the legal framework for VAT as it relates to these issues and makes necessary recommendations among which is that government should adopt appropriate and current information technology that will make tax payment process easy, which will in turn reduce tax evasion.