FG waives VAT and Customs Duties on gas and gas equipment

In December 2023, the Ministry of Finance (MoF) released a Circular on fiscal incentives for the gas sector. This Circular is in line with the Presidential Gas for Growth Initiative which aims to improve the investment climate in Nigeria and to increase the utilisation and supply of gas in the domestic market. The Circular contains incentives and directives to the Nigerian Customs Service (NCS) and the Federal Inland Revenue Service (FIRS).

Key highlights:

1. The Circular reiterates the Customs Duties exemption in the law applicable on machinery, equipment or spare parts imported into Nigeria for the exploration, processing or power generation through the utilisation of Nigerian gas. Further to this, the Circular lists 41 equipment categories which qualify for this import duty waiver, including CNG and LPG conversion kits, cascades, dispensers; gas washing machines, gas leak detectors, regulators, storage tanks of all sizes, dedicated LPG vehicles and dedicated CNG vehicles.

2. The Circular also directs the FIRS and the NCS to apply a zero percent VAT rate on the following items:

• Feed Gas for all processed gas
• Compressed Natural Gas (CNG)
• Imported Liquefied petroleum gas (LPG)
• LPG and CNG equipment components, conversion and installation services
• All equipment relating to the expansion of CNG, LPG and the Presidential CNG initiative, including conversion kits

Some new exemptions were introduced such as the exemption of imported LPG from VAT, compared to the VAT Modification Order (VMO) 2021 which only exempted locally produced LPG. Also, the circular exempts “feed gas for all processed gas”. This should mean that natural gas is now exempt from VAT.

There may be some questions around the legal basis of the Circular. However, we expect that it would have practical effect because it grants incentives rather than impose new obligations.

Please see the Circular and our TAx Alert below:

Download PwC Tax Alert - FG waives VAT and Customs Duties on gas and gas equipment

Download MoF Circular on VAT exemption