Friday, April 30, 2021 / 06:58 PM /by Wole Obayomi /Header Image Credit: London Web Factory
The Federal Inland Revenue Service (FIRS) has issued Information
Circular No.: 2021/03 ("the Circular") on the application of Value Added
Tax (VAT) on road tolls, paid parking, access pass, recreational or
entertainment parks, admission to events and other related services based on
Section 2 (1) of VAT Act, Cap. V1, LFN, 2004 (as amended) (VATA or "the Act").
We have provided below, a summary of the key aspects
of the Circular:
1. Services liable to VAT
Circular provides that toll gates or points, paid parking, recreational parks,
entertainments and other related operations, for which a fee is paid for access
or use ("the services"), are liable to VAT in line with the provisions of
Section 2 and the definition of "services" in Section 46 of the VATA.
the FIRS noted that where the services are outsourced, VAT will apply on both
the commission and fees charged by operators, as they are not VAT-exempt in the
First Schedule to VATA.
2. Value of taxable services
Circular outlines various business arrangements in relation to the services and
the applicability of
VAT thereon as follows:
will apply on only the service fee charged to the consumers.
- Outsourced operations
will apply on both the fee charged to the consumers and the commission
earned by the operator.
- Build operate and transfer
includes an arrangement where a public facility is built by a private
operator with a view to transferring the facility to the government in the
future after recouping its investment cost. In this instance, VAT
will apply on the fee or toll charged to the consumers by the operator,
the commission paid by the government to the operator, and the fee or toll
charged by the government after taking control of the facility.
- Privately owned facilities: VAT will apply on the fee and
commission charged by a private entity involved in the management or
operation of a toll gate/ point, paid parking facility, park or
- Admission to events and
Circular provides that VAT applies on fees charged for admission to events
and performances, such as shows, theatrical performances, circus
performances, fairs, amusement parks, concerts, exhibitions, or other
similar cultural events, sporting events, and educational and scientific
events, including conferences and seminars. However, where such
events are conducted by or in educational institutions as part of learning
activities, teaching and coaching, VAT will not apply on the tickets or
fees granting access to the events.
of the services are required to issue tax invoices that clearly state the
service fee and the VAT
charged thereon, in line with the provision of Section
13A of VATA, and comply with other filing obligations in the Act.
Toll gates, especially on public amenities, such as
roads and bridges, do not constitute a supply of service for VAT purposes.
Rather, they are tax-collection mechanisms by the government for the use of
such facilities. The Black's Law Dictionary (9th Edition 2009) defines a "toll" as "a tax or due paid for the use of something, esp., the
consideration paid either to use a public road, highway, or bridge...". Thus,
as a toll in itself is a tax, applying VAT on it will amount to charging tax-on-tax.
Therefore, the FIRS should revisit the inclusion of
road tolls and access pass for use of public amenities as taxable supplies in
the Circular to avoid double taxation.
Download Here - FIRS Circular
on VAT on Road Services
statement was first published in the Issue 4.11/ April 2021 Newsletter of KPMG
of Friday, April 30, 2021. For further enquiries, please contact the author, Wole Obayomi via email@example.com
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