ALERT: From July, you will start paying VAT for stock exchange transactions

Investors and dealing members will begin to pay value-added tax for transactions carried out on the Nigerian Stock Exchange (NSE).

This is due to the expiration of the Value-Added Tax (Exemption of Commissions on Stock Exchange Transactions) Order of 2014.

During her tenure as coordinating minister for the economy and minister of finance, Ngozi Okonjo-Iweala had exempted VAT deductions from commissions earned on the traded value of shares, commissions payable to the Securities and Exchange Commission, commissions payable to the Nigerian Stock Exchange and commissions payable to the Central Securities Clearing System.

At the time, Okonjo-Iweala said the purpose of the exemption was to encourage investments in the Nigerian capital market.

VAT is a type of consumption tax placed on a product at every stage of processing/value addition. The cost is usually paid by the consumer.

The order, which was a result of the powers conferred on the minister of finance in section 38 of the Value Added Tax (VAT) Act, was to be effective for five years.

The section of the act empowers the minister to amend the rate of tax chargeable; and amend, vary or modify the list of exempted goods and services set out in the first schedule to the act.

The five-year period lapses on July 25.

Except there is an order from the ministry of finance extending the exemption, transactions carried out on the stock exchange will be eligible for VAT deductions.

In an interview on Tuesday, Zainab Ahmed, former minister of finance, said the federal government has plans to raise VAT from the current 5% to 7.5% by 2020.