Elvis Onuora & Co (Chartered Accountants)
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Newsletter           November 2015                  Volume 02,           Issue 06





RE: Warm Spring Waters Nigeria Limited, Ahmina Limited, Seven up Bottling Company plc, Voltic Nigeria Limited, Nigerian German Chemicals Plc, Adama Beverages Limited, Nigerian Bottling Company Limited, Ragolis Waters Limited, Spring Waters NigeriaLimitedV FIRS.



Part 1 paragraph 2 of the First schedule of the Value Added Tax Act exempts Basic food items from VAT. However, the Act does not define basic food items .In order to address this issue, the FIRS had issued an Information Circular dated 1st December 2009 which contained a list of items exempted to include sachet water other than bottled and packaged water and thus demanded VAT from manufacturers of bottled water (Bottlers) and in some cases refused to issue Tax Clearance Certificate to them for not collecting and remitting VAT company.


The Federal High Court upheld all the presentations of the Bottlers and held that water is basic food item and therefore an exempt from value added tax (VAT) regardless of whether it has been processed or packaged. The court did not follow an earlier decision in the case of Monamer Khod Enterprises VS FIRS where it was held that the sale of packaged water is liable to VAT.

The court also held that the FIRS cannot amend the provisions of a statue by issuing a circular.


The Bottlers are manufacturers of bottled water who are members of the Association of Food, Beverage and Tobacco Employers (AFBTE)


The FIRS assessed one of the bottlers to about ₦1 billion for VAT on bottled water. It also withheld their TCCs.

The Bottlers filed a case against FIRS arguing that; first the treatment and packaging of water does not change the character of water from a basic food item. Again they argued that the decision in the Monamer  case can be distinguished because the question in that case was whether packaged water was manufactured goods  and liable to tax  rather  than whether it is a basic item exempt from VAT. Moreover, they also argued that the FIRS has no powers to amend, vary or modify the First Schedule to the Act  and any attempt to do so by Information Circular of 2009 is null and void.

Lastly they pointed out that according  to the Oxford Advanced Learner’s  Dictionary and National Food and Drugs Administration and Control Act, food includes  water and thus once an item is a basic food item, it ought to be exempt.


In its presentation, FIRS argued that the issue of whether packaged water was liable to tax was settled in Monamer’s case.

It also argued that bottled water is a luxury good and should be liable to tax as the Act does not intent to exempt luxury goods,


Again it argued that packaging, processing, purification and filtration have removed bottled water from the ambit of basic food


Lastly that that the Circular did not seek to amend the Act but to clarify it and aid the effective administration of VAT thus as some of the Bottlers had collected and paid VAT, they had waived their right to complain.


The judgment settles the issue of whether water, either packaged or processed is exempt from VAT being a basic food.

The decision confirms the need for the FIRS to limit its functions to the application of the laws as enacted and not seek to modify or expand the laws. If it needs to, it should seek an amendment through the law making process.

Lastly, we advice our client to challenge the actions of FIRS when they act outside the scope of enabling laws.


Re: Gazprom Oil and Gas Ltd. V.FIRS


The Tax Appeal Tribunal (TAT) sitting in Abuja  has  ruled that non-resident companies providing services outside Nigeria to Nigerian companies are not carrying on businesses in Nigeria except the services were performed in Nigeria or VAT is included in their invoices to their Nigerian Clients.

considered carefully.




Gazprom oil and Gas Nig Ltd received consultancy and logistics services from some non-resident consultants who never sent employees or equipment to Nigeria and whose invoices it had settled without charge or payment of VAT to FIRS.

Relying on Section 10 of the VAT Act, the FIRS issued two VAT re-assessment notices on the Appellant.

The Appellant argued that the Act does not impose VAT based on the destination principle as practiced in some countries but on origin principle.

The Appellant also argued that a supplier with no physical presence in Nigeria cannot be said to be carrying on business in Nigeria and therefore not liable to register for or charge VAT in Nigeria.

The consultants were therefore under no obligation to include VAT on their invoices to be deducted and paid to FIRS as enshrined in Section 10(2) of the VAT Act.

However in its argument, the FIRS argued that the use of the phrase “supplied in Nigeria” in S.10 imposes VAT based 
on the destination principle that is the place of consumption of the goods or services and therefore liable to VAT in Nigeria.

They also argued that the existence of physical presence is not required for a company to successfully carry on business in Nigeria and that the existence of a contract with a long duration implied the foreign company were carrying on business in Nigeria.

Lastly, they argued that a VAT invoice is not a precondition for the payment of VAT on imported services. 


The decision of the Tribunal revolved around the interpretation of S.10 of the Act which provides as follows:

a.     For the purpose of this Act, a non-resident company that carries on business in Nigeria shall register for the tax with the Board using the address of the person with whom it has a subsisting contract as the address for purposes of correspondences relating to the tax.

b.     A non-resident company shall include the VAT  in its invoice and the person to whom the goods and services are supplied in Nigeria shall remit the tax in the currency of the transaction

Based on the above mentioned conditions for eligibility of  the appellant to pay VAT, the Tribunal discharged the re-assessment notices and granted reliefs to the appellants.


Until this judgment is challenged in a higher court, Nigeria will probably be the only country that imposes VAT on local supplies and exempts imports from the same tax.

The impact of this decision might prompt the FIRS to restart the process of amending the VAT Act to align the law with the best practices of applying VAT on cross boarder services based on the destination principle.


The judgment has however raised some questions such as: Was the intention to exempt imported goods and services from VAT while maintaining the VAT on local supplies? Will it be right for taxpayers to demand for a refund of VAT paid over the years on imported services?


Finally, the precedent set by the Tax Appeal Tribunal (TAT) will remain the position of the law in similar cases pending the outcome of subsequent appeals by FIRS to a higher court.


1.      “What you do is what matters, not what you think or say or plan.” -Jason Fried

2.     “Who you are tomorrow begins with what you do today.” -Tim Fargo

3.     “It's not what you do but that kind of job you do that makes the difference.”- Ben Carson

4       “Nobody ever drowned in his own sweat.” - Ann Landers

5        “Hard work spotlights the character of people: some turn up their sleeves, some turn up their noses, and some don't turn up at all.”- Sam Ewing


HEALTH TIPS: Keeping a healthy body system

1.      Make it a habit to eat fresh veggies and fruits regularly (a fruit per day is better)

2.     Cut down on caffeine and caffeinated beverages

3.     Maintain a healthy weight

4.     Stay clear of much sugary, stimulant and processed foods.

5.      Exercise four days a week (20-30 mins per day)

6.     Rest for an extended period (when you can)

7.      Always have breakfast

About Our Organization…

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