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VAT and international online sales in Nigeria: what do I have to do?

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One of the most common doubts when selling online is how VAT is invoiced . In these online sales , it is not invoiced in the same way if the final customer is a Spanish person, a resident in the EU or a resident outside the EU. Likewise, it will also vary depending on whether it is a natural person or a company.

VAT is one of the main tax obligations of online businesses in Nigeria, so, whether you already have your online store fully operational, or if you are still starting to get advice and looking for your ideal ecommerce platform , this post interests you. Keep reading to solve all your doubts about the VAT application !

How is VAT applied to online sales in Nigeria?

Different VAT rates are applied in each country depending on the product or good in question. For example, in the countries of the European Union there is a difference between standard, reduced and super-reduced VAT. In Spain, the general VAT is 21%, the reduced one is 10% and the super-reduced one is 4%.

In online sales, whether or not to apply the VAT tax will depend on what is considered to be the country in which the operation is carried out, which is known as the VAT localization rule. This rule is regulated in items 58 and 59 of part 1 of the second schedule of the 1999 constitution of the Federal Republic of Nigeria, which highlights that both the federal and states can modify the items for their benefits.

 

How to invoice VAT if the end customer is a company

 

If you are a Nigerian company that sells online and sends products to companies, you should know, in general, if they are in Nigeria, within the ECOWAS or outside it. 

  • If the final customer is a company and its fiscal headquarters is in Nigeria: in this circumstance the sale would be subject to VAT and the corresponding tax rate would be applied according to the type of product.
  • If the end customer is a company and its fiscal headquarters outside the West Africa, it is considered an export. The invoice is issued without VAT and the taxes will be applied at your destination 
  • If the client is a company and its fiscal headquarters is within the ECOWAS but outside of Nigeria, we would be facing an intra-community delivery of goods, so this online sale is invoiced without VAT and is taxed in the country of destination. 
  • If the client is a company and its tax office is outside the ECOWAS, it would be an export. The sale will also not be subject to VAT and this tax will be applied in the country of destination.

How to invoice VAT if the end customer is a natural person

If our end customer is not a company but a natural person, although there are other factors that may influence, in general, VAT will be applied according to the buyer’s country:

  • If the end customer is a natural person and resides in Nigeria, in the same way that happens with companies based in Nigeria, Nigeria VAT will be applied to this online sale.
  • If the end customer is a natural person and resides outside Nigeria: the invoice will be issued without VAT and this tax will be paid at the destination
  • If the end customer is a natural person and resides within the ECOWAS but outside of Nigeria, this sale will be subject to VAT in Nigeria. However, if sales exceed certain limits established for each country, they will be taxed in the country of destination and the VAT of the corresponding country will have to be charged. 
  • If the end customer is a natural person and resides outside West Africa it is considered an export and is exempt from Nigerian VAT.

You have already seen that online sales between different territories are more complex than it seems. In any case, we recommend that you consult an expert who can advise you for your specific case.

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