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LIRS Encourages Adherence to Consumption Tax Guidelines by Business Entities

The Lagos State Internal Revenue Service (LIRS) has called upon proprietors of eateries, hotels, and event venues in the state to contribute to the development of the region by prioritizing the consistent collection and remittance of a 5% consumption tax on all consumables and personal services.

“Enacted on June 22, 2009, the Hotel Occupancy and Restaurant Consumption Law of Lagos State, also known as the Hotel Consumption Law, imposes a 5% consumption tax on the value of goods and services consumed in hotels, restaurants, and event centers within the state. This tax is calculated based on the total cost of facilities, consumables, or personal services provided to a consumer by the hotel, restaurant, or events center.”

During The Tax Talk program broadcasted on TVC, Jimi Aina, Director of New Growth at LIRS, clarified that while the consumption tax serves as a significant revenue source for the Lagos State Government, funding public amenities and services such as healthcare, education, transportation, and security, owners of establishments like restaurants, hotels, and event centers are obligated to register with the LIRS as collecting agents.

Contrary to misconceptions, Aina emphasized that the state has not introduced additional taxes on these establishments. Instead, “consumers purchasing taxable goods or services in the state are responsible for paying the consumption tax, which is already included in the price and collected by the appointed agent on behalf of the Lagos State Government.”

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Aina stated, “Many people misunderstand the concept of consumption tax. It is often thought that this tax is an additional burden on hotels and restaurants, but this is not the case. In reality, ‘it is the customers who are taxed when they dine out, attend events, or have drinks at a bar. The tax rate is five per cent. By paying the consumption tax, consumers contribute to the development and maintenance of these amenities and services.'”

Referring to Section 1 of the Lagos State Consumption Tax Law, Aina explained that “consumers purchasing taxable goods or services in Lagos State are responsible for paying consumption tax. The tax is included in the price of the goods or services and is paid to the collecting agent who collects it on behalf of the Lagos State Government.”

Regarding the remittance process, Aina highlighted that “collecting agents (restaurants, hotels, and event centers) must collect these taxes from consumers and remit them to the LIRS by the 20th day of the month following the month of collection. Failure to comply may result in legal consequences, including penalties, interest, business closure, and prosecution.”

According to LIRS, “monthly returns on sales using the UCL 2 form must be submitted with a report indicating the total amount of payments made for all chargeable transactions, the amount of consumption tax collected, and any other information required by the LIRS.” Every collecting agent is also required to “register with the LIRS and maintain records of registration as a Collecting Agent.”

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