There has been quite a lot of confusion and misconception concerning value added tax (VAT) remittance and witholding tax (WHT) deduction especially in the blogosphere. Bloggers and websites owners with a lot of traffic and adverts placements who want to be tax compliant have found it difficult to do so as they do not know
There has been quite a lot of confusion and misconception concerning value added tax (VAT) remittance and witholding tax (WHT) deduction especially in the blogosphere. Bloggers and websites owners with a lot of traffic and adverts placements who want to be tax compliant have found it difficult to do so as they do not know how to go about it.
So if you are a blogger or website owner, here is how to structure your payment to include tax charges:
In the case of local advertisers who want to place adverts on your site or blog, ensure that you include 5% VAT rate to their invoice i.e if the local advertisers were originally billed to pay N50,000, with the inclusion of 5% VAT rate the bill becomes N52,500.
Assuming your customer or the advertiser is a foreign one, how do you go about your tax charges?
Presently, VAT is exempt on all exports from Nigeria i.e foreign advertisers should not be charged the extra 5% VAT rate whenever you bill them for advert placement. In the same vein, you are not obligated to pay the Federal Inland Revenue VAT for such services or products especially if it is earned in foreign currency. This applies to advert income from Google Adsense, Foreign Affiliate marketers etc. If your Ad Agency is Google, because Google is not registered in Nigeria as an Ad Agency or Client, you cannot charge them VAT.
Concerning Withholding Tax (WHT), who has the right to make this deduction whenever you trade with them?
WHT is usually deducted on contract of purchases or services represented by an invoice. In addition, the law also clearly states that the service or purchase will be delivered in the location of the client thus not in the ordinary course of business.
This means that if you make a purchase from a store you pay the full amount inclusive of VAT but they do not have the right to deduct withholding tax because the puirchase was done during the ordinary course of business. However, if you get the store to supply the product to your company under a supply contract then you should deduct withholding tax because the transaction is viewed as not being in the ordinary course of business.
Based on this, companies who pay you to advertise on your website or blog should not deduct WHT from your invoice except you are under a contract; as the adverts are placed on your website in the ordinary course of business.
Also, it is advisable that website owners and bloggers issue a debit note or a bespoke rate card containing the specific Ad rate the advertiser requires and your own bank details. This saves you from the mishap of advertisers deducting WHT from your own fee in the invoice you give them since WHT operates using the invoice mode of payment.