What is VAT?
VAT is the abbreviation of Value Added Tax and is in general due when goods and/or services are sold. It generally applies to all goods and services that are bought and sold for use or consumption in Nigeria. It is a Consumption Tax because it is borne ultimately by the final consumer.
Who must pay VAT?
Generally, VAT is invoiced by the supplier that is selling goods or services and collected from the customer. Subsequently, the supplier reports and remits the collected VAT to the tax authorities.
Note: In case of non-resident supplies involving Digital services, under the Guidelines issued by the Federal Inland Revenue Service, pursuant to sections 10 of the Value Added Tax (VAT) Act Cap V1, LFN 2004 (as amended), subject to the exemptions in the VAT Act, all services in Nigeria are chargeable to VAT in Nigeria and there is no differentiation between supplies made to business customers (B2B) and supplies made to consumers/private individuals (B2C). As such, where a supplier of digital services is liable to register for VAT in Nigeria, as is the case for Freshworks, it must collect and remit VAT on all taxable supplies to Nigerian customers.
Why am I being charged VAT?
Freshworks provides Software-as-a-Service that falls within the rules concerning Digital Services in Nigeria. As such, Freshworks is required to collect Nigerian VAT on all supplies made to customers in Nigeria.
How is Freshworks determining which customers Nigerian VAT applies to?
Freshworks will apply VAT based on the VAT rules for non-resident suppliers providing services to customers in Nigeria.
It is your responsibility as a customer to ensure that your bill-to/ship-to address is correct.
Does Freshworks provide VAT exempt or non-VATable services?
No. All services currently provided by Freshworks to customers in Nigeria are subject to Nigerian VAT at the standard rate.
Are there any special exemptions applicable for charities under which VAT may not be charged?
No. There are no exemptions from VAT available under Nigerian VAT rules for the services Freshworks supplies to charities in Nigeria.
Will VAT apply even if a Nigerian company provides a valid VAT number to Freshworks?
Yes. VAT applies to all the products/ services that Freshworks sells to customers in Nigeria.
Every customer is unique and so are their specific tax circumstances. The above stated information should not be considered as tax advice, but as a general overview of relevant tax rules. Freshworks cannot provide you with tax advice for your individual situation, and therefore we strongly recommend speaking with a professional tax advisor for tailored advice.
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