There are strong indications that the Nigerian Stock Exchange (NSE) and NASD may resume five per cent Value Added Tax (VAT) charges on transactions today.
The order for exemption of VAT from all NSE and NASD transactions was granted by the Federal Government in 2014. The order became effective on the July 25, 2014 for a 5-year period, and this is expected to end today.
To this end, all dealing members of NSE and NASD have been directed to resume charging VAT on all NSE and NASD transactions effective Thursday July 25, 2019.
Subsequently, a five per cent VAT on brokerage commission earned, NSE and NASD fee and CSCS fee will be restored.
It will be recalled that some stockbrokers had been sending notifications to their clients, informing them that from today, they would begin to pay extra amount of money for transactions carried out on their behalf.
According to a notice sent to investors by one of the stockbrokers in Lagos, “Value Added Tax (VAT) on commissions will now be charged on transactions conducted on the Nigerian Stock Exchange (NSE).
“The order for exemption of VAT from all NSE transactions was granted by the Coordinating Minister of the Economy and the Honourable Minister of Finance in 2014. The order became effective on the 25th July 2014 for a 5-year period, which expires on the July 24, 2019.
“In this regard, all dealing members of the Nigerian Stock Exchange have been notified to resume charging of VAT on all NSE transactions effective 25th July 2019.
“Subsequently, a five per cent VAT on brokerage commission earned, NSE fees and CSCS fees will be restored effective July 25, 2019.”
The NSE had in a circular dated July 10, 2019 and titled NSE/RD/BDR/CIR5/19/07/10 also informed stockbrokers of the resumption of the VAT payment.
“Please refer to our circular with reference BDR/CIR/GOI/10/14 dated 27 October 2014 on the above subject matter (attached as Appendix A); and the Value Added Tax (VAT) Exemption of Commissions on Stock Exchange Transactions Order (Order) granted by the Coordinating Minister for the Economy and Honourable Minister of Finance in 2014. (See, Official Gazette of the Federal Republic of Nigeria: No. 95, Vol. 101 issued on 30 July 2014).
“The order, which became effective on July 25, 2014 is valid for a period of five (5) years, and thus the exemption granted in the Order is set to expire on 24 July 2019.”
Some stakeholders in the nation’s capital market had recently called on the Federal Government to renew exemption granted on VAT which is due to expire in July 2019.
While speaking at Association of Securities Dealing Houses of Nigeria (ASHON) 2019 Capital Market Summit, Chairman, Board of Directors, Omnibus Business Solutions Limited and Pilot Securities, Chief Olusegun Osunkeye, said: “For the immediate season, the capital market has been haemorraging for the past two years, for a number of reasons and despite the exemption granted on VAT, which is due to expire in July 2019. I would suggest the exemption be renewed for a further period.
“For example, the capital market operators have to pay a minimum tax based on their share capital. It is difficult to rationalise why using share capital to determine assessment to pay income tax, even when the business makes a loss.”
Osunkeye, who was also the Chairman of Nestle Nigeria Plc, Glaxo Smithkline Consumer Nigeria Plc and Lafarge Africa Plc, said federal and state government should seriously consider using the capital market for viable capital expenditure segment of the annual budgets in order to help growth and development of the capital market.