It is no longer news that some organizations, particularly those operating in the Oil & Gas sector and Ministries Departments and Agencies (MDAs) deduct Value Added Tax (VAT) at source on VATable transactions/invoices received from their vendors and remit same to the Federal Inland Revenue Service (the Service) in line with the provisions of the VAT Act. This practice has been in existence since 2007.

Following the amendment to Section 14 (3) of the VAT Act (Section 31 of Finance Act 2021 Refers), the Service is empowered to appoint persons who will serve as agents for collection of VAT on its behalf. This agency role does not in any way preclude the person(s) so appointed from fulfilling their regular VAT obligations which include:

  • Charging VAT on VATable transactions/invoices.
  • Paying VAT on VATable supplies (Goods/Services) received from vendors.
  • Rendition of monthly VAT returns in the specified format.
  • Remitting VAT (i.e., excess of OUTPUT VAT over INPUT VAT).

Recently, the Service in exercising its power as provided in the VAT Act appointed the following persons in addition to the existing agents (Oil & Gas Operators and MDAs) as agents of VAT collection;

  • MTN Nigeria
  • Airtel Nigeria
  • All Deposit Money Banks (DMBs) (As defined by the CBN Guidelines).

At the moment, Nigeria has more than 30 DMBs which include:

  • Commercial Banks (Interest & Non-Interest banks).
  • Merchant Banks
  • Financial Holding Companies in Nigeria.



You will agree to the fact that the persons so appointed by the Service must have been adjudged to be compliant or seen to be compliant. Early this year, 29 March 2022 to be precise, the Service awarded top 20 taxpayers at the 2nd National Tax Dialogue held in Abuja. Therefore, it is not surprising to see that MTN Nigeria and Airtel are part of the persons appointed by the Service as the duo also made the list of top 20 taxpayers for the year.

Expectations from Appointed Persons

The persons appointed by the Service for the purpose of deducting VAT at source and remitting same are charged with the following responsibilities;

  • Withhold or collect VAT charged on all taxable supplies made to them.
  • Give an account through rendition of returns within 21 days of the following month.
  • Remit the tax so collected or deducted in the currency of transaction to the Service on or before 21 days of the month following.
  • Give an account of the tax due on companies’ taxable supplies and remit same to the Service within the specified timeline of 21 days.

Claim of INPUT TAX

A supplier whose OUTPUT tax is withheld by a collection/appointed agent is expected to offset its INPUT VAT from OUTPUT VAT collected from other taxable supplies. Where the INPUT VAT is in excess of the total OUTPUT VAT actually collected or received by the supplier in any period, the supplier is entitled to process a refund. It is important to note that the Service has stated that it has made necessary arrangements for refund in such instances.

Arising Issues

In as much as VAT compliance is taking another dimension through the appointment of collection agents, it should be noted that this dimensional change is never without its own challenges which include:

  • Additional compliance responsibility which may translate to additional cost to appointed persons.
  • Suppliers’ transacting businesses with appointed persons may choose to transact with other persons for the fear of not being able to get refund for excess INPUT VAT.
  • Already existing collection/appointed agents operating in the Oil & Gas sectors might need to be re-appointed as the subsisting provision of the VAT Act which empowered their initial appointed was repealed by Section 31 of the Finance Act 2021.
  • The Service may need to provide the basis and guidelines for appointing collection agents to demonstrate fairness in the process.


Take Away

  • It is expected that the Service will expand the list of appointed persons over time after carrying out an assessment of the tax yield from VAT deduction at source.
  • Suppliers whose main customers are VAT collection agents will always have need to claim refund as there won’t be any OUTPUT VAT to offset their INPUT VAT.
  • The Service has to clarify the measures instituted for processing VAT refund by affected suppliers to enhance confidence in such system.
  • Suppliers or taxpayers whose main customers have been appointed as VAT collection agent may not likely have OUTPUT VAT exposure going forward, hence precludes the need for VAT audit or monitoring on such suppliers.


It is pertinent to note that the present economic climate is a global phenomenon, thus economies across the globe are becoming very proactive on the possible ways of structuring and also managing their economy in a very strategic manner.

Generally, Nigeria’s revenue has been dwindling in recent times thus necessitating the need to change focus from oil revenue to non-oil revenues which among others, is tax. VAT as an indirect tax is known to be the most reliable source of tax revenue in Nigeria and other developing economies, hence the need to optimally explore it.

As the year runs out, the Service may employ every power at its disposal to drive tax compliance, in order to put the country’s tax system in proper perspective to deliver on its mandate and also achieve targeted revenue for upcoming year.




For further clarifications  feel free to connect with our team:

  • Ajibola Sogunro                                                                              
  • 07030806046                                                                                               
  • Team Lead                                                                                                         


  • Olanrewaju Azeez 
  • 08051434163
  • Senior


  • Rere Ogunrinde
  • 08024278909
  • Associate  


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