Tax Alert

This alert contains:

VAT Modification Order 2024 - Incentivising Energy Transition in Nigeria

Background

The Federal Government of Nigeria has recently issued the Value Added Tax (Modification) Order 2024 (the “Order” or “VMO 2024”), which introduces notable amendments to the VAT Act.

The VMO 2024 does not repeal or replace the most recent VMO which was issued in 2021, but only introduces some specific amendments. Please see link here to the VMO 2021, including our previous Tax Alert on the subject.

The modifications in the VMO 2024 are significantly focused on Nigeria’s ongoing efforts around energy transition. In our view, the Order relies on three broad principles:

1. Recognises and incentivises gas as an important fuel in the long-term transition to clean energy.

2. Provides VAT exemption for the renewable energy value chain.

3. Recognises the impact of Nigeria’s current energy challenges (and the related costs of fuels) since the harmonisation of exchange rates, and seeking to provide reliefs for Nigerian citizens in the medium-term.

Some major changes include:

Goods exempted from VAT

a) Under the VAT Modification Order 2024, the following items are now exempt from VAT:

Equipment and infrastructure for Compressed Natural Gas(CNG) and Liquefied Petroleum Gas (LPG) expansion, including conversion kits.
Domestic LNG processing facilities and equipment.
Electric vehicles and parts for their assembly