February 6, 2019

LAGOS – To ensure the industry overcome its current challenges, the Association of Bureaux de Change Operators of Nigeria (ABCON),yesterday emphasized the need for the Central Bank of Nigeria(CBN) to exempt bureau de change operators from payment of Value Added Tax (VAT). The association’s president, Alhaji Aminu Gwadabe, stated this in his speech at the launch of the ABCON live run automation project in Lagos. He said the association should also be exempted from Commission on Turnover (COT), reduce BDCs annual license renewal fee and also expand their scope of transactions,lamented that the BDC sector has been confronted with many challenges that have continued to defy solutions. According to him,some of the challenges include multiple exchange rate, abnormal bank charges, Value Added Tax (VAT) and Commission on Turnover (COT), parallel market operators and illegal International Money Transfer Operators (IMTOs), porous international borders, complex documentation requirements and poor capacity/ skills of operators. He said these hitches have negative impact on BDCs’ efforts toward compliance to statutory and regulatory requirements, adding that six units within the CBN are involved with BDC regulations, supervision, licensing, monitoring. He, however, stated that the association currently has an understanding the Federal Inland Revenue Service (IFRS) where members now pay five per cent of commission made from their transactions. Speaking on the launch of the automation project, Gwadabe said the portal will sustain transparent transactions in the BDC corridor, boost the morale of operators and ensure continuous operations in ABCON. “The ABCON has fully upgraded its Information Communication and Technology (ICT) platforms, to achieve full digitization of BDCs operations in line with its goal of sustaining transparent operation and prompt rendition of weekly returns to regulatory agencies. “Of special note is also the integration of our platform to immigration platform for the verifications of international passport. Already, we are in advance engagement with the Irish technology experts for the achievement of this idea”, he said. On deepening capacity and skills of industry operators, Gwadabe said the association is appealing to the CBN to issue Letter of Consent for its proposed training institute. “This is going to boost the current ABCON Management commitment in building capacity for its members and to stimulate competency in the sector”, he said.   Source: independent

Summary On 11 December 2018, the Court of Appeal (COA or the Court), in the case between Best Children International Schools Limited (BCIS Limited or the Company) vs Federal Inland Revenue Service (FIRS), held that the Company is liable to Companies Income Tax (CIT), regardless of its claim to be an educational institution.  The Court reached this decision on the grounds that BCIS Limited failed to prove that it qualified as an educational institution entitled to the tax exemption granted under Section 23(1)(c) of the CIT Act.   Details BCIS Limited is an educational institution registered as a private company limited by shares under the Companies and Allied Matters Act (CAMA).  On 1 September 2014, the FIRS issued an assessment of over N30 million to BCIS Limited consisting of CIT, Education Tax (EDT), Withholding Tax, and PAYE tax for 2008 to 2012. BCIS Limited instituted an action at the Federal High Court (FHC) challenging the said assessments on the grounds that it is exempted from paying corporate tax under the CIT Act because it is an educational institution.  However, the FHC ruled in favour of the FIRS holding that BCIS Limited, is a company limited by shares, was liable to the tax as assessed by the FIRS because only companies limited by guarantee qualify for tax exemption under Section 23(1)(c) of the CIT Act. Dissatisfied with the decision of the FHC, BCIS Limited appealed to the COA.   The crux of the issues before the COA was whether BCIS Limited qualified for corporate tax exemption under Section 23(1)(c) of the CIT Act. The COA ruled in favour of the FIRS, affirming the decision of the FHC. Specifically, the Court held that BCIS Limited is a profit-making company limited by shares and is therefore liable to tax. In delivering the Judgment, the Court held that BCIS Limited has to prove that it is a company engaged in ecclesiastical or charitable or educational activities of a public character to qualify for tax exemption under Section 23(1)(c) of the CIT Act.  In addition, the Court held that BCIS Limited has to prove that its profits are not derived from any trade or business it carries on. Furthermore, while the FHC had ruled that only companies limited by guarantee, which are prohibited from distributing profits by CAMA, are entitled to the tax exemption, the COA simply affirmed the decision of the FHC. According to the COA, the Company failed to adduce evidence to demonstrate that it is a company limited by guarantee and failed to prove that it is an academic institution or an institution of public character qualified for tax exemption under the CIT Act.   Implication The Judgment, in this case, implies that only companies limited by guarantee can be exempted from CIT under Section 23(1)(c) of the CIT Act.  Thus, educational institutions, charitable organization and ecclesiastical bodies that are registered as companies limited by shares or other forms of companies other than companies limited by guarantee may not enjoy tax-exempt status under Section 23(1)(c) of the CIT Act. This Judgment is a departure from established practice that a company solely engaged in educational activities should be exempt from CIT.  In a similar case between American International School of Lagos (AIS) v FIRS, the Tax Appeal Tribunal held that AIS, being an educational institution of a public character, was not liable to pay corporate tax.  Although AIS is a company limited by guarantee, the crux of the issues, in that case, was whether AIS was an educational institution of public character and not the form in which AIS was registered under the CAMA. While Section 26 of the CAMA provides that a company, which is to be formed for the purpose of promoting education should be registered as a company limited by guarantee where it does not intend to distribute its profits to its members, the clear words of the Section 23(1)(c) of the CIT Act makes no reference to the form of the company in granting tax exemption.  Thus, one would have expected that Section 23(1)(c) should ordinarily apply to all forms of companies given that tax laws are to be construed narrowly and strictly and the ordinary meaning of words used in tax laws should be applied. Nevertheless, this Judgment stands as a Judicial Precedent until it is overturned by the Supreme Court, even though it is open to debate from taxpayers and practitioners.  It is important for affected taxpayers to engage their tax and legal advisers to review their peculiar situation and provide relevant advice to them on how to mitigate tax liabilities that may arise from the enforcement of this judgment on taxpayers with similar structures.   Source: Brand Spur

Apple said on Tuesday it had reached an agreement with French authorities to settle 10 years of back taxes, becoming the latest US company to reach a deal with France which has led a European push for higher taxes on tech giants. French news weekly reported that Apple had paid nearly 500 million euros ($570 million) to resolve the case in a confidential settlement reached in December. Apple declined to disclose the amount paid, but a source familiar with the case confirmed the figure to AFP. “The French tax administration recently concluded a multi-year audit on the company’s French accounts and an adjustment will be published in our public accounts,” Apple said in a statement. “We know the important role taxes play in society and we pay our taxes in all the countries where we operate, in complete conformity with laws and practices in force at the local level,” added the company. French authorities declined to comment further, citing the confidentiality of tax matters.   – French tech tax looms – Apple is one of several American technology giants in the line of fire in Europe over their tax strategies, which see them route their income through low-tax nations such as Ireland or Luxembourg. In 2016, it was ordered by the European Commission to pay 13 billion euros in back taxes to Ireland. The European Commission said Apple paid an effective corporate tax rate of just 0.005 per cent on its European profits in 2014 — equivalent to just 50 euros for every million. The deal in France comes as the government prepares to push ahead with its own unilateral “GAFA tax” — named after Google, Apple, Facebook and Amazon — faced with the failure of EU members to agree on how to get technology companies to pay more tax on their European operations. The tax, to be put to parliament in a bill later this month, would affect companies with global sales of more than 750 million euros and 25 million euros in France, according to the government. It would be retroactive to January 1 and is expected to raise 500 million euros this year. French Economy Minister Bruno Le Maire has called the question of how and where global companies pay their taxes “a major issue in the 21st century”. But an agreement among EU members has proved elusive. Ireland, Denmark and Sweden have all blocked plans for a levy for fear of dissuading investment and Germany has proved lukewarm on the issue, fearing US retaliation against its car industry. The issue has been referred to the OECD, which aims to come up with an international tax by 2020.   – Scramble to settle – Apple is the second major technology company to reach a tax deal with French authorities within the past year, reflecting the growing pressure from voters on governments to bring foreign companies to book. In February 2018, Amazon said it had settled a French claim for nearly 200 million euros and would start declaring all its earnings in the country, ending a dispute that had dragged on for years. In 2017, however, France’s tax collection drive suffered a setback with a local court ruling that Google was not liable to pay 1.1 billion euros in taxes claimed on revenues transferred from France to Ireland. According to L’Express, the deal between France and Apple was clinched after several months of talks, and concerned the small amount of revenue the firm booked in France while the sales it reported in Europe ballooned. The report said Apple’s European revenues exploded seven-fold, from 6.6 billion euros in 2008 to 47.7 billion in 2017, most of which was booked in Ireland where it has its European headquarters.     Source: Punch