Agency Business Classification for E-Invoicing

General
1

My name is Azeez Adebayo, a financial consultant.

In the context of agency businesses, the term “real turnover” specifically refers to the actual income earned by the agency, commonly known as agency fees. It is important to note that when agencies issue invoices, these typically consist of two main components: the reimbursable costs and the agency fee itself.

While the total value of all invoices raised by the agency may be substantial—potentially exceeding ₦5 billion—the amount recorded as income in the agency’s financial statements is limited to the agency fee, for example, ₦1 billion. The remaining amount, such as ₦4 billion, which represents reimbursable costs, is disclosed separately in the notes to the accounts, as the agency does not earn any margin on these amounts.

A pertinent question therefore arises: would an agency business structured in this manner qualify to be categorised within the ₦5 billion business class, given that its recognised income is only ₦1 billion, while the aggregate invoice value surpasses ₦5 billion?

2

Dear @Azeez,

From a regulatory and tax classification perspective, business size thresholds (e.g., the ₦5 billion class) are generally assessed based on gross turnover / total consideration from transactions, not net income or margin retained after reimbursable costs.

Hence, even where an agency operates on a principal–agent model, and only recognizes the agency fee (₦1 billion) as revenue in its financial statements. The total value of invoices issued (₦5 billion+) still reflects the scale of transactions facilitated by the entity.

For e-Invoicing, fiscal reporting, and business classification purposes, the agency would typically be assessed against the aggregate invoice value, not just the agency fee.