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In Ess-ay Holdings Limited v. FIRS (Federal Inland Revenue Services), the Tax Appeal Tribunal “TAT”  ruled  that under the VAT Act, VAT is paid on the supply of goods and services and a lease is neither  a good or service and therefore not subject to VAT.  In reaching its decision, the TAT noted that the VAT Act (prior to the amendment introduced by the Finance Act, 2019) did not define what constitutes “goods and services”. Thus, the TAT relied on the Black’s Dictionary of Law and the Sales of Goods Act as applicable in Nigeria and the United Kingdom and concluded that before a thing can be regarded as a “good”, it must be moveable and where it is on a land, it must be severable from the land.  While a service is an intangible commodity in the form of human effort, such as labour, skill or advice.

The TAT also relied on several judicial authorities to hold that lease of real property is a transaction for the transfer of an interest or a right (possessory) in the property and the right so transferred, assigned or granted to the tenant is an incorporeal right which is not subject to VAT under the VAT Act.

The above case commenced before the introduction of the Finance Act of 2019 and as such the contents of the Finance Act 2019 could not be applied to it. The Value Added Tax Act before amendment did not define goods and services.  Section 2 of VAT Act stated that, “tax shall be charged and payable on the supply of all (emphasis ours) goods and services other than goods and services listed in the First Schedule of the Act”. The First Schedule of the Act listed goods and services exempt from payment of VAT and did not include leases in its list.

Recent Development

The Finance Act 2019 has amended the provisions of the VAT Act by inserting definitions for goods and services in Section 46. Under the new provisions, goods are defined as:

  1. all forms of tangible properties that are movable at the point of supply- excluding money or securities- and
  2. any intangible product, asset or property over which a person has ownership or rights, or from which he derives benefits, and which can be transferred from one person to another excluding interest in land.

Services are also defined to mean anything other than goods, money or securities which is supplied excluding services provided under a contract of employment.

This amendment has filled the gap in the law sought to be interpreted by the TAT.  The amendment has defined goods and services and excluded transfer in interest in land from goods and services subject to VAT. Therefore, transfer of interest in land ought not to be subject to VAT.

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