Penalties of VAT do occur in three situations thus:
VAT penalties are additional fees that are added to your VAT tax bill in accordance with certain criteria. The amount you pay is calculated by multiplying the VAT arrears by a certain percentage.
- Non-Registration: Failure or refusal to register with the Board within the specified time, the taxpayer shall be liable to a penalty of N10,000 for the first month in which the failure occurs and N5,000 for each subsequent month in which the failure continues. If this persists, the premises where the business is carried on shall be sealed up.
- Non-Deduction: By definition: A non-deductible value-added tax (VAT) is the VAT payable by a purchaser which is not deductible from his own VAT liability if any.
Non-deduction of or failure to collect tax by a taxable person attracts a penalty of 150% of the uncollected tax plus 5% interest above the CBN’s rediscount rate.
- Non-Remittance of VAT: Failure to remit tax shall attract a penalty of a sum equal to 5% per annum plus interest at a commercial rate payable within 30 days of notification by the tax authority.