Court affirms FIRS’ authority to levy VAT on Bolt’s ride-hailing and food vendor services

A Lagos Federal High Court has upheld the FIRS’ authority to collect VAT on transport and food services provided by Bolt drivers and food vendors. The development marks a defining point in a case that started in 2022.

According to a court judgment on Thursday, which was delivered by Justice Akintayo Aluko, the court affirmed a previous ruling by the Tax Appeal Tribunal (TAT) that recognised the Federal Inland Revenue Service (FIRS) legal backing to place food and transport services provided by independent ride-hailers and vendors via Bolt digital platforms as value-added tax (VAT) collection agents. 

In the report cited by The Cable, the Bolt’s legal team argued that FIRS’ guidelines wrongly categorised the platform as a taxable agent, despite the company not directly providing transportation or food services and its non-physical presence in Nigeria. 

While the FIRS counsel, Moses Idaho, argued that the claims are simply a misinterpretation of the law, he prayed that the court should dismiss the appeal. 

In his ruling, the presiding Judge resolved most of the issues in favour of FIRS, noting that the tax body acted within the law when it appointed the platform as a collection agent under Section 10(3) of the VAT Act.

“There is no valid reason to disturb the judgment of the Tribunal. Consequently, the judgment of the Tribunal delivered on 26th May 2023 is affirmed,” the judge said, adding that the appeal failed and was accordingly dismissed.

Also, the judge placed a fine of N1 million on Bolt, who filed the appeal against the TAT ruling in 2022. 

Similar Read: How Bolt, Uber drivers in Abeokuta renegotiate app prices by over 100%.

How Bolt previously challenged the FIRS 5% VAT 

In August 2019, the FIRS added a 5% VAT on online transactions, which systematically affected businesses operating in Nigeria’s internet space. The move, according to the tax authority, was backed by the late Muhammadu Buhari’s administration to rake in revenue. 

Before that, the administration, in collaboration with the tax agency, had introduced programmes like the Voluntary Assets and Income Declaration Scheme (VAIDS) and Voluntary Offshore Assets Regularisation Scheme (VOARS), which mandate citizens to pay tax on offshore assets.

The VAT directive affected tech companies, foreign shipping websites such as Jumia, Konga, online ticketing platforms, video streaming platforms, and logistics operators, with the likes of Bolt, GOKADA, and Uber directly falling under the policy. 

The FIRS stated then that it doesn’t matter if the item has already been ‘vatted’ in its originating country. In its argument, once a business is operating in Nigeria, it’s liable to pay the 5% VAT. 

As a lot of companies and businesses depend on delivery, dispatch and logistics companies to complete their businesses, some of these logistics companies carry out the majority of their transactions online, thereby making them eligible to pay VAT.

In lieu of this, Bolt challenged the policy, arguing that it doesn’t have a physical presence in Nigeria and its drivers and vendors are independent agents. 

In 2022, Bolt filed suit No. TAT/LZ/VAT/074/2022 at the Tribunal, demanding an order that restrains the FIRS from imposing VAT on various services rendered via the platform. They also claimed that the tax collector’s move violated Section 10 of the VAT Act and that Bolt should not be classified as a supplier due to its non-resident digital intermediary.

Bolt noted that the drivers who make use of its platform are not its employees but rather independent providers of cab services, and Bolt does not own any of the cars used by the drivers.

Meanwhile, FIRS submitted that Bolt has variously referred to itself as an agent to the drivers on its platforms, and urged the Tribunal to dismiss the appeal.

The tribunal dismissed the case in May 2023, prompting the operators to challenge the decision at the Lagos Federal High Court.