Unless there is an official extension, effective July 25, 2019, Value Added Tax (VAT) will become applicable to commissions earned or payable on transactions conducted on Stock Exchanges in Nigeria.
This is because that is the expiration date of the order which exempts VAT on commissions earned or payable on Stock Exchange transactions.
As part of the Federal Government’s policy measures to encourage investments in the Nigerian capital market, the order which became effective on July 25, 2014 was to operate for five years.
The order was made in 2014 by Ngozi Okonjo-Iweala, the then coordinating minister for the economy and minister of finance, in exercise of her powers under section 38 of the Value Added Tax (VAT) Act, Cap. V1, Laws of the Federation of Nigeria, 2004.
Federal Government had then exempted from VAT commissions earned on traded value of shares payable to Securities and Exchange Commission (SEC), payable to the Nigerian Stock Exchange (NSE), and payable to the Central Securities Clearing System (CSCS).
Speaking to BusinessDay on the development, Gbite Oduneye, CEO, AOA Investment Group, said although the order is about to expire, “this is not a good time to jettison it”.
He noted that discarding that order was equivalent to adding insult to injury in a market that is already down and struggling to recover.
“Note that domestic investors are not buying stocks as they should and the foreign investors are not playing big here,” he said.
The expiration of the order will come on the heels of investors showing less interest in stocks, as reflected in the -5.35 percent loss year-to-date (Ytd), for the NSE.
At the NSE, analysts say despite prices being attractive across the board, investors are not positioning in anticipation of an impending market rally and have not shown the willingness to take advantage of beaten down stocks.
“This is the time the SEC, NSE, and CSCS should use to make good points for themselves as part of their efforts to grow the market. They need to dialogue with the Federal Government on this,” Oduneye said.