The concept of e-invoicing to increase taxing transparency and reduce costs continues to spread to newer areas of the world. The number of countries embracing e-invoicing is rising in Africa, with Nigeria becoming one of the recent entrants to the club.
The Nigerian government recently introduced a new cross-border electronic invoicing system to regulate imports and exports.
The e-invoicing system has been in place in Nigeria since early 2020, with the Federal Inland Revenue Service (FIRS) regulating operations. The government of Nigeria mandated that all imports and exports of goods to and from the country follow an e-invoicing system from February 1, 2022.
The main goal of the cross-border e-invoicing program is to prevent under-reporting the accurate value of imports and defrauding the country of taxes and duties.
The Central Bank of Nigeria (CBN) recently issued the electronic invoicing mandates in a circular dated January 21, 2022, along with the cross-border electronic invoicing program guidelines. According to the circular, the country’s Automated Tax Administration System (ATAS) will handle electronic invoicing.
Understanding these new regulations is crucial to running a tax-compliant business in the country. Failing to comply with the new rules can lead to heavy penalties and restrictions.
In this article, let’s talk in detail about the new e-invoicing system in Nigeria and what you need to do to comply with it.
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What are the current e-invoicing rules in Nigeria?
Nigeria has been using an electronic invoicing system through a centralized, government-regulated platform since 2020. The country introduced these electronic invoicing mandates to improve tax transparency and compliance. In the latest effort to expand the umbrella of the electronic invoicing system, the government recently introduced cross-border electronic invoicing.
The electronic invoicing system in Nigeria is mandatory for all businesses with an annual turnover exceeding 25 million Nigerian Naira. Companies are required to create electronic invoices in a format prescribed by FIRS. The electronic invoice authenticated by the FIRS can then be sent to your customers.
The Nigerian government introduced a new mandate to control the import and export of goods into and out of the country. Named the Cross-Border electronic Invoicing program, new laws are laid out to improve transparency and regulate import and export operations.
What is the Cross-Border e-Invoicing program?
The Central Bank of Nigeria introduced the cross-border electronic invoicing system to prevent foreign currency depletion and track fraudulent trade practices. As of February 1, 2022, all import and export invoices in Nigeria must be provided to the Automated Tax Administration System electronically.
The new cross-border electronic invoicing program states that the government will now operate a global price verification mechanism. If the unit prices of imported goods exceed the global verified accurate value by more than 2.5%, they will be barred from electronic filing using Form M or Form NXP.
The importers and exporters must also register through a dedicated electronic portal of the trade monitoring system. The CBN-appointed service provider can issue a valid digital certificate for a year. Businesses can use this digital certificate to sign any e-invoice.
According to reports, the Central Bank of Nigeria charges a subscription fee of US$350 per native or foreign supplier authentication.
Exemptions to the electronic invoicing requirements in Nigeria
Although the government of Nigeria aims to expand the electronic invoicing system, currently, there are a few exemptions-
- Businesses that have a projected annual turnover of less than 25 million Nigerian Naira or less than 25 employees are exempted from the electronic invoicing system
- Diplomatic missions and personnel associated with them are also exempted from filing e-invoices
- Nigerian government agencies are also not required to comply with the electronic invoicing system
Similarly, there are exceptions for the cross-border electronic invoicing program as well.
For instance, import and export invoices valued under US$10,000 don’t need to comply with the new regulations unless their annual turnover exceeds US$50,000, and they can continue issuing paper invoices. However, the CBN encourages traders to adopt the electronic trade monitoring system.
Furthermore, specific categories of imports and exports are exempted from the new regulations. For instance, imports made by Nigerian security agencies, diplomatic missions, and United Nations (UN) organizations are exempted from complying with the electronic invoicing system.
How to send compliant e-invoices in Nigeria?
Compliant e-invoices in Nigeria must be submitted through the official portal of the Federal Inland Revenue Service (FIRS). Businesses must follow the guidelines laid out by the FIRS to ensure that the invoices have the appropriate format and are digitally signed.
Here are the steps to create and send compliant invoices in Nigeria:
Step 1: Register with FIRS
Before accessing the electronic invoicing portal, you must register with the FIRS as a business. You will need your Tax Identification Number (TIN) and any other relevant document to register. The registration process is straightforward and should only take a few minutes.
Step 2: Prepare the e-invoice
The next step is to prepare the invoice in the correct format per the FIRS format. The invoice must contain all pertinent details, including the name of the business, description of goods and services, invoice number, and price details.
Step 3: Authenticate the invoice
Once you create a compatible e-invoice, the next step is to authenticate it from the FIRS. Once you submit e-invoices to the portal, each invoice will be digitally signed and assigned a unique invoice number that you can track.
Step 4: Send the invoice
Finally, you can send your authenticated invoice to your customers through e-mail or other approved electronic means.
Remembering to keep records of your e-invoices and receipts for remitting taxes and other regulatory purposes is crucial.
If you need guidance creating and distributing e-invoices in Nigeria, you can schedule a consultation with one of Storecove’s invoicing experts.
While the steps above reflect how you can send e-invoices in Nigeria, the steps to generate e-invoices for imports and exports to a foreign supplier according to new rules can significantly differ.
Firstly, you must register with the Central Bank of Nigeria registration portal. Once you register, you will be issued a digital certificate that can be used to prepare and send invoices for import and export items to the CBN or an authorized dealer bank for authentication.
Characteristics of the electronic invoice in Nigeria
As with other countries using electronic invoicing systems, the e-invoices issued in Nigeria must follow a proper format to be valid. Some of the characteristics of e-invoices in Nigeria include the following:
- The e-invoices must be generated in a standard form prescribed by the FIRS.
- Each electronic invoice issued in Nigeria must contain a unique authentication number issued by FIRS. Once you upload the e-invoice on the FIRS portal, and if the invoice is approved, you will receive a unique identification number.
- The invoices must be digitally signed.
- You can communicate the authenticated e-invoice to your customers via e-mail or FIRS-approved electronic means.
- As a business, you must maintain the records of import and export transactions for at least ten years.
What should businesses do to comply with e-invoice regulations in Nigeria?
Complying with electronic invoicing regulations in Nigeria is crucial to avoid penalties and restrictions. It is essential to be careful while preparing, authenticating, and recording the e-invoices.
The electronic invoicing system in Nigeria is quite simple. Depending on your business type, you must register with the FIRS or CBN to create electronic invoicing in Nigeria.
After successful registration, you can start filing your e-invoices through any approved electronic invoicing platform.
Let Storecove help you create compliant invoices in Nigeria
Since introducing e-invoice mandates in Nigeria in early 2020, all businesses in Nigeria grossing an annual turnover of over 25 million Nigerian Naira must send e-invoices.
To provide tighter control on import and export transactions, the Nigerian government recently mandated that all importers and exporters use a new electronic invoicing system called the cross-border electronic Invoicing program.
Businesses must comply with the laws and regulations to void penalties by the tax authorities. Storecove can help you understand the rules and help create a customized solution for your business. Contact us to talk with one of our e-invoicing specialists today.
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