– Whether law firms are taxable persons and bound to remit Value Added Tax to the Federal Inland Revenue Service on the fees they charge their clients
The thrust of the appellant’s case in the lower Court is whether as a law firm which provides services to members of the public for profit she is actually a taxable person within the meaning of the Value Added Tax Act Cap V1 of 2004 and so liable to collect value-added tax from her clients and remit to the respondent.
The learned trial Judge thought she was and dismissed her case for lacking in merit. After first stating the trite position that the primary rule of interpretation is that words be given their ordinary meaning, His Lordship Abubakar, J. resolved that issue this way: “Applying the principles of law, therefore, I am of the considered legal view that the list of ‘services’ exempted from paying VAT by the aforesaid schedule clearly did not include ‘legal service’ which the plaintiff firm renders to the society. In other words, legal services unlike medical services is chargeable for the purpose of payment of Value Added Tax. In the circumstances, therefore, the argument of learned counsel for the plaintiff that because Legal Practitioner does not engage in production or distribution or consumption of goods and for this reason should not be VAT collection agent is baseless. This is because rendering service of professional expertise is what is in issue and not the production or consumption of consumable goods.
“I, therefore, resolve issue 1 in the negative and hold that the plaintiff is not exempted from registration with the defendant for the purpose of charging or collection of Value Added Tax on the professional services she collects from her clients. I would like to make it clear to the plaintiff that Value Added Tax is paid by the client in addition to the professional fees. See S.12 of the Act. In fact S. 8 of the Act made it mandatory for the plaintiff to register with the defendant failing which the plaintiff will be sanctioned. Consequent upon this section, I also resolve issue 2 in favour of the defendant and against the plaintiff.”
His Lordship also resolved against the appellant the consequential issue of the respondent’s right to demand Value Added Tax from the appellant, saying: “The 3rd issue is whether the defendant has the statutory power to demand payment of VAT from the plaintiff, this question is answered in the clear and unambiguous provision of S. 42 of the Act which provided that the chairman of the defendant Board or any Senior staff of the defendant can write to taxable person like the plaintiff and demand for payment of VAT. In fact, the provision was reinforced by S.15 of the Act which stated in plain and clear terms that it is mandatory for the plaintiff being a taxable person to render a return to the defendant on all legal services she rendered to the public. Therefore the argument of the learned counsel for the plaintiff that there is no provision in the Act which empowers the defendant to demand VAT from the plaintiff is without legal foundation and therefore baseless. Consequently, I hold that the letters of the defendant to the plaintiff demanding the plaintiff to render monthly returns on VAT is proper and in order.”
This decision is undoubtedly well-rooted in the provisions of the Value Added Tax Act Cap IV of 2004 and I do not see how I can fault it. The Value Added Tax Act, which also states in its section 7 that the Respondent shall be responsible for the administration of value-added tax and shall do all such things as it may deem necessary and expedient for the collection and assessment of the tax and shall account for all amounts so collected in accordance with the provisions of the Act, provides in its Sections 1, 2 and 3 that: 1.
There is hereby imposed and charged a tax to be known as the Value Added Tax (in the Act referred to as ‘the tax’) which shall be administered in accordance with the provisions of this Act. 2. Tax shall be chargeable and payable on the supply of all goods and services in this Act referred to as ‘Taxable goods and services’ other than goods and services listed in the First Schedule to this Act. It is worthy of note that, contrary to the appellant’s argument, the Act does not limit itself to only suppliers of goods but extends the duty of collection and remission of VAT to also those who only supply services. A lawyer or firm of lawyers in private practice undoubtedly supplies legal services to the public for a fee and so caught by this provision and bound to charge and remit to respondent value added tax as stipulated by the Value-Added Tax Act on the fees they charge their clients.
In fact, Section 46 of the same VAT Act (as amended) puts this beyond doubt by its definition of the terms ‘supply of services’ ‘taxable goods and services’ and ‘taxable person’ which it defined thus: ‘Supply of services’ means any service provided for consideration. ‘taxable goods and services’ means the goods and services not listed in the First Schedule to this Act. “Taxable person’ includes an individual or body of individuals, family, corporations sole, trustee or executor or a person who carries out in a place an economic activity, a person exploiting tangible and intangible property for the purpose of obtaining income therefrom by way of trade or business or a person or agency of Government acting in that capacity.
The same statute imposes an obligation on taxable persons (including lawyers and law firms) to charge and collect from their customers or clients value-added tax and remit to the respondent, thus: “14. Collection of tax by a taxable person (1) A taxable person shall on supplying taxable goods or services to his accredited distributor, agent, client, or consumer, as the case may be, collect the tax on goods or services at the rate specified in section 2 of this Act.”
“15. A taxable person to render returns: (1) A taxable person shall render to the Board, on or before the 21st day of the month following that in which the purchase or supply was made, a return of all taxable goods and services purchased or supplied by him during the preceding month in such manner as the Board may, from time to time, determine.” What is more, Section 8 of the statute makes registration with respondent by taxable persons like appellant mandatory.
It reads: 8(1) A taxable person shall, within six months of the commencement of the Act or within six months of commencement of business, register with the Board for the purpose of this Act. Subsection 2 of the same section goes on to impose on defaulting persons penalties of N10,000 for the first month of failure and N5,000 for each subsequent month.? The goods and services that are exempted from the collection of VAT are also specifically listed in the First Schedule to the Act thus: PART 1: GOODS EXEMPT:
1. All medical and pharmaceutical products.
2. Basic food items.
3. Books and educational materials.
4. Baby products.
5. Fertilizer, locally produced agricultural and veterinary medicine, farming machinery, and farming transportation equipment.
6. All exports.
7. Plant, machinery, and goods imported for use in the export processing zone or free trade zone: Prided that 100 percent of production of such company is for export otherwise tax shall accrue proportionately on the profits of the company.
8. Plant, machinery, and equipment purchased for utilization of gas in downstream petroleum operations.
9. Tractors, ploughs, and agricultural equipment and implements purchased for agricultural purposes.
PART II: Services exempt
1. Medical services.
2. Services rendered by Community Banks, People’s Bank, and Mortgage Institutions.
3. Plays and performances conducted by educational institutions as part of learning.
4. All export services.
PART III Zero-rated goods and services.
1. Non-oil exports.
2. Goods and services purchased by diplomats.
3. Goods purchased for use in humanitarian donor-funded projects. ‘Humanitarian donor-funded projects’ include projects undertaken by non-Governmental Organizations and religious and social clubs or societies recognized by law whose activities are not for profit and in the public interest.
Legal Practitioners and law firm is not mentioned here. The rule of interpretation is that when something is specifically mentioned in a statute the intendment is that it excludes whatever is not mentioned: P. & C.H.S.C. Ltd & Ors. v. MIGFO Nig. Ltd & Anor. (2012) SCM 205. That is just as it is also the law that whenever a word or expression is defined in a statute, that definition applies for the purposes of that statute to the exclusion of any other meaning that same expression may have.”
Al-Maseer Law Firm v. FIRS (2019) LPELR-48628(CA)
Per Boloukuromo Moses Ugo, JCA (Pp 15 – 22 Paras B – E)
