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VODACOM v. FIRS - Are intangibles goods, services or neither?

With the Federal High Court ruling against Vodacom in its dispute with FIRS concerning the supply bandwidth capacity, it has become even more exigent to broach the question: are intangibles goods or services? Or are they neither of these? It seems both FIRS and the courts have taken the view that all intangibles are taxable. Some taxpayers have unfortunately fallen prey to this erroneous application of the VAT Act, complying with unlawful demands for VAT remittances or standing by haplessly as FIRS officials sealed off their business premises for VAT non-remittance.

In a majority of VAT litigation, this issue, though a defining one, the determination of which could potentially end the matter without parties getting embroiled in a long drawn out conflict, was not always debated. The general notion of intangibles as constituting services seems pervasive, prompting taxpayers to fully litigate disputes that should not have proceeded beyond the preliminary stages. This newsletter seeks to demystify the scope of the VAT Act by investigating the character of various intangibles.