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 thesame jurisdiction and/or where the governing law of the transaction documents is different from the nationalityor jurisdiction of parties. Cross border taxation focuses on the laws which have been put in place by a countryfor the levying of tax on the inbound and outbound transfer of goods and services in its own jurisdiction. InNigeria, the law governing and regulating such transactions is the Value Added Tax (Amendment) Act 2007 andValue Added Tax amendments contained in the Finance Act, 2019 and 2020. VAT is imposed and collected on thevalue added at each stage in the production and distribution of a good or service. It is, in effect, levied on thedifference between the sales and production inputs of a business. It is charged at 7.5% on supply of goods andservices in Nigeria. Cross-border transactions come with many challenges which impact current VAT rules andsystems negatively and expose serious shortcomings and difficulties in their proper interpretation, complianceand administration. The principal deficiency in modern VAT systems is their inability to levy VAT on affectedtransactions as many VAT rules were designed only taking into account national economic activities and notinternational activities. Many cross-border trading activities may potentially fall outside of the tax net therebygenerating uncertainty and consequently, litigation. This paper primary focus is the reduction of cross-border taxobstacles by improving the VAT rules governing cross border arrangement. It is therefore intended in this workto appraise the legal framework for VAT as it relates to these issues and makes necessary recommendationsamong which is that government should adopt appropriate and current information technology that will make taxpayment process easy, which will in turn reduce tax evasion.