Economy | Taxes & Tariffs

FIRS Issues Guidelines on the Applicability of VAT on Toll, Parking and Other Related Services

Apr 30, 2021   •   by   •   Source: Proshare   •   eye-icon 839 views

Friday, April 30, 2021 / 06:58 PM /by Wole Obayomi /Header Image Credit: London Web Factory


The Federal Inland Revenue Service (FIRS) has issued InformationCircular No.: 2021/03 ("the Circular") on the application of Value AddedTax (VAT) on road tolls, paid parking, access pass, recreational orentertainment parks, admission to events and other related services based onSection 2 (1) of VAT Act, Cap. V1, LFN, 2004 (as amended) (VATA or "the Act").


We have provided below, a summary of the key aspectsof the Circular:


1.     Services liable to VAT

TheCircular provides that toll gates or points, paid parking, recreational parks,entertainments and other related operations, for which a fee is paid for accessor use ("the services"), are liable to VAT in line with the provisions ofSection 2 and the definition of "services" in Section 46 of the VATA.

Further,the FIRS noted that where the services are outsourced, VAT will apply on boththe commission and fees charged by operators, as they are not VAT-exempt in theFirst Schedule to VATA.


2.    Value of taxable services

TheCircular outlines various business arrangements in relation to the services andthe applicability of

VAT thereon as follows:


  1. Government-operated arrangement: VAT will apply on only the service fee charged to the consumers.
  2. Outsourced operations arrangement: VAT will apply on both the fee charged to the consumers and the commission earned by the operator.
  3. Build operate and transfer arrangement: This 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.
  4. 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 recreational centre.
  5. Admission to events and performances: The 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.


3.   Compliance requirements

Operatorsof the services are required to issue tax invoices that clearly state theservice fee and the VAT

charged thereon, in line with the provision of Section13A of VATA, and comply with other filing obligations in the Act.



Toll gates, especially on public amenities, such asroads and bridges, do not constitute a supply of service for VAT purposes.Rather, they are tax-collection mechanisms by the government for the use ofsuch facilities. The Black's Law Dictionary (9th Edition 2009) defines a "toll" as "a tax or due paid for the use of something, esp., theconsideration 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 ofroad tolls and access pass for use of public amenities as taxable supplies inthe Circular to avoid double taxation.


Download Here - FIRS Circularon VAT on Road Services



* Thisstatement was first published in the Issue 4.11/ April 2021 Newsletter of KPMGof Friday, April 30, 2021. For further enquiries, please contact the author, Wole Obayomi via [email protected]

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