Tuesday, 27 August 2019

Let's talk about VAT!

We have received quite a few enquiries about Value Added Tax (VAT) recently so we have created this concise post addressing the most frequently asked questions we get on the topic. ⁣

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What is VAT?
VAT is that 5% charge that you see at the bottom of your Soap et al. invoice. 

Why do you charge VAT?
Because it is a government requirement for most businesses and we (Soap et al.) are eligible. 

How does it work?
Every registered (registered with the CAC*) company/business has a unique ‘Tax Identification Number (TIN)’ that is given to them. This gives the FIRS** access to our corporate account and they can see every kobo that goes into it. At the end of every month we take out 5% of ALL the money that has gone into the account and pay it to the FIRS. 

So the VAT is not yours?
No it is not. We don’t keep a kobo of it. 

Can I choose not pay VAT?
As a Nigerian citizen, no you cannot. But if you are exempt from paying tax and have the documentation to prove it, please send it to our email (soapetalng@gmail.com) and our accountant will verify with the FIRS. Once this is done, you will not be charged tax on any transactions made with Soap et al. (The process takes 5-10 working days). 

Can you reduce the VAT for me?
Unfortunately we can’t. The amount of fixed at 5% by the government. We can’t increase or decrease this. 

What if I make a payment but I don’t pay the VAT?
FIRS doesn’t care about that. They can see our account and will charge us irrespective (even if we make a loss) so we will have to pay what you don’t. And this will be on top of our own company tax which really isn’t fair on us because we are a business in this economy just like you and we are trying to survive as much as you are. 

So what happens now?
We will now be unable to process ANY order where the VAT is not paid in full. The losses that we make from incomplete payments have become significantly more than we can bear. If payments aren’t received in full (plus VAT), that order will not be dispatched until the balance is paid. 

What if I always make full payment every time?
You are a superstar and we love you for making our lives that much easier. Thank you!  

I am a business owner as well and I shop from you. Do you I get any tax decrease (deduction) from the FIRS?
Yes! You do. The reason why the VAT is specifically shown on all your Soap et al. receipts is because when you go to pay your own monthly VAT to the FIRS, you can show your Soap et al. receipt and get a deduction from the total amount you would have paid. That’s the benefit YOU GET from our being tax compliant! :)


*CAC : Corporate Affairs Commission
**FIRS" Federal Inland Revenue Service

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We hope you found this post to be sufficiently informative about VAT. While this post is primarily focused on VAT for Soap et al., how it applies to us (as a business) and you as a prospective customer - it could also be useful to you if you own a cosmetic/beauty related business and are thinking about growing your business further and going legit. This information will give you some understanding of what to expect and what is expected of you. ⁣


Happy formulating,

Team Soap et al.

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