September 3, 2019 – Sunmola David & CO

EU directive on administrative cooperation in field of taxation amended

Introduction The European Union has added further impetus to its objective of providing greater transparency with regard to harmful tax practices through an amendment to EU Directive 2011/16/EU. The amendment builds on the Common Reporting Standard, which allows for the automatic exchange of information on financial accounts held by non-tax residents at an international level and the Organisation for Economic Cooperation and Development’s Base Erosion and Profit Shifting project. In brief, EU Directive 2011/16/EU has the introduced the mandatory reporting of cross-border arrangements that are indicative of potentially aggressive tax planning. The relevant disclosure requirements must be followed by intermediaries and, in some instances, taxpayers. Hallmarks. One of the directive’s key points is that it provides no definition of ‘aggressive tax planning’. Instead, taxpayers must adhere to the list of hallmarks found in Annex IV of EU Directive 2011/16/EU, which include general and specific features that are deemed potential indicators of tax avoidance or abuse. Alongside broadly drafted key definitions (eg, ‘intermediary’ and ‘cross-border arrangement’), the hallmarks appear to give the directive a broad scope. The reason given for this is that the intricacies and complexity of aggressive tax-planning arrangements are constantly evolving and modified in response to countermeasures from tax authorities. Under EU Directive 2011/16/EU, a ‘cross-border arrangement’ is an arrangement that concerns more than one EU member state or an EU member state and a country outside the European Union. In a similarly broad fashion, an ‘intermediary’ is anyone who has (or could be reasonably expected to have) knowledge of (or who directly or indirectly aids or offers advice regarding) the design, marketing, organisation, offer or management of a reportable cross-border arrangement. However, a waiver may be issued by an EU member state where the reporting obligation would breach legal professional privilege under the national law of that country. The various hallmarks appear to have been introduced to provide expansive powers of scrutiny. Generic hallmarks under Category A of the directive, specific hallmarks under Category B and certain hallmarks in Paragraph 1 of Category C are subject to the ‘main benefit test’. These hallmarks can be considered only if it is established that the principal benefit or one of the main benefits of an arrangement is to obtain a tax advantage. However, other sections, such as Section D concerning the exchange of information and beneficial ownership, are not subject to the ‘main benefit test’ and make it possible for arrangements that may undermine reporting obligations under the laws implementing EU legislation or any equivalent agreements on the automatic exchange of financial accounting information, including agreements with third countries to be under the purview of mandatory reporting. Category E encompasses specific hallmarks concerning transfer pricing. Source: International Law Office

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FIRS Public Notice On Deduction At Source of WHT And VAT On Compensation Paid By Principal Companies

Tax news / Tobi Aminu

The Federal Inland Revenue Service (FIRS) issued a Public Notice today, 14 August 2019, directing taxpayers, particularly companies in the Fast Moving Consumer Goods sector, to deduct and remit withholding tax and value added tax on the “compensation” due to their distributors, dealers and agents. The FIRS defines “compensation” to include commission, rebates, etc., granted in the form of cash, credit note or goods-in-trade. The FIRS claimed, in its Public Notice, that some companies have not been complying with the provisions of the Companies Income Tax (Rates, etc. Deduction at Source (Withholding Tax) Regulations S.1 10 1997 (sic) and Paragraph 3.8 of its Information Circular No. 2006/02 of February 2006. The FIRS, therefore, noted that it would commence monitoring of compliance with its directive by relevant companies. Source: Proshare

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‘Economy not in good shape to increase VAT rate’

TAX SERVICES / Tobi Aminu

Okwudili Ijezie is the Managing Partner/CEO, Okwudili Ijezie &Co. In this interview with Kehinde Olatunji, he urged the Federal Government to drop the idea of increasing the VAT rate until the economy of the country is in good shape. He lamented that many businesses are merely struggling to remain afloat and the increase if effected, could lead to their sudden deaths. He also spoke on the ongoing seminar to train individuals and government agencies on Internal Generated Revenue (IGR), tagged: “Strategies for improving IGR for States in Nigeria.” The government has always collected taxes. Is there anything it has not been doing well that you think this seminar will correct? May I first thank The Guardian crew for its initiative and resilience on matters that concern the nation. I’m grateful for your persistence in seeking relevant information that will better the lots of the country. Now, to your question, the current happenings in the political and economic environments of the nation demand that all hands must be on deck to take the country to the next level. The major objective of the seminar is to expose participants to alternative strategies and initiatives that will improve transparency, efficiency, and effectiveness of IGR Systems. Participants would equally be equipped with the basic skills for evaluation and appraisal of the existing Revenue Collection Framework and what is happening in other jurisdictions. Also, a fresh awareness will be created for participants on legal and institutional frameworks that are essential in effective revenue collection. The government encourages people to be self-employed yet does not create a conducive atmosphere for them to thrive. Over time, these businesses have been taxed so high that they are being threatened. How can this be addressed? I do not entirely agree with your assertion that the government does not create a conducive atmosphere for self-employed businesses to thrive. The seminar will focus on the current tax policies and there will be suggestions on topical issues. For instance, it will address issues of whether to increase the Value Added Tax rate, which currently is 5 per cent. All aspects of the tax laws will be touched at the seminar, with a view of equipping participants with the current legal and institutional framework for revenue collection. Do we have laws that govern taxation in Nigeria and how can we ensure that the government works within them? Yes, we have Laws that govern taxation in Nigeria. These include: Personal Income Tax Act, Cap P8, LFN 2004 (as amended), Value Added Tax Act, Cap VI, LFN 2004 (as amended), Petroleum Profits Tax Act, Cap P13, LFN 2004 (as amended), Companies Income Tax Act, Cap C21, LFN 2004 (as amended), Tertiary Education Trust Fund (Establishment, Etc) Act 2011, Stamp Duties Act, Cap S8, LFN 2004 (as amended) among others. In order to ensure that government works within the ambit of tax laws, I will advise individuals and corporate organisations to engage the services of tax consultants, with a view to utilizing all the tax incentives embedded in the various tax laws in order to reduce their tax liabilities to the legally acceptable minimum. These tax consultants, who are versed in the tax laws, would ensure that taxpayer’s rights are applied. These rights include: Object to a tax assessment that is not in agreement with business activities as provided by the tax laws, Appeal against a notice of refusal to amend an assessment as specified by the relevant laws Be issued a tax clearance Certificate (TCC) upon settlement of tax liabilities or be given a notice of denial within two weeks of application, TCC itself is free, and be granted refund on excess tax paid after proper auditing with the option of using it to offset future tax liability. Do you think the government is overtaxing people? If not why the outcry about heavy taxes? To be honest, I do not think that the government is overtaxing people. In the same vein, I am not aware of any outcry about heavy taxes. The tax rates, to the best of my knowledge, have not been increased for over two decades. However, I am aware of the outcry by several people and organisations against the proposed increase of Value Added Tax (VAT) rate, from the present rate of 5 per cent to 7.5 per cent. My opinion is that the time is not ripe to effect this increase. I appeal to the Federal Government to drop this idea of increasing the VAT rate until the economy is in finer shape. Many businesses are merely struggling to remain afloat. The increase, if effected, could lead to their sudden deaths. What I will advocate is for the government to strategise and bring more people into the tax net. This is part of the raison d’être of our IGR SEMINAR. May I appeal to the various state governments and the federal government, and even the local governments to utilise this seminar to up their internally generated revenues. Source: Punch

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CAC Extends 50% Reduction

CAC SERVICES / Tobi Aminu

The Corporate Affairs Commission, CAC, has announced on Monday that it has extended the 50 percent reduction in registration fee for business names in Nigeria. The programme launched under CAC’s Business Incentive Strategy allows intending business owners to pay N5, 000 less of the original fee. However, the discount window will end on Friday, August 16, after which payment for registration of business names will revert to the original fee. The commission, in a statement released in Abuja through its Head of Public Affairs, Moses Adagusuu, said that the commission has successfully registered 220,773 Micro, Small and Medium Enterprises, MSMEs, in the space of ten months. The CAC said that the MSMEs were registered between October 2018 and July 31, this year. Adaguusu said, “From when the BIS started in October 2018 to July 31, the commission gathered at least 220,773 MSMEs under the BIS window. The list is growing day by day.” It also reminded Micro, Small and Medium Enterprises about the benefits of registering their business names with the commission. Adaguusu revealed that “Registration of their businesses will enable them own corporate accounts with banks, have access to loans, grants and other government interventions.” The commission clarified that the three-day extension of the cut in registration fee was to allow MSMEs that could not register due to the Id-el-Kabir Islamic celebration to take advantage of the opportunity at the reduced cost of N5, 000. It also revealed that MSMEs could register their business names through the online registration porter ( services.cac.gov.ng or cac.gov.ng ) or offline at the Commission’s offices, nationwide. Source: Investor King

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FIRS: VAT, withholding tax must be remitted on the 21st of every month

Tax news / Tobi Aminu

The Federal Inland Revenue Service (FIRS) says all companies must remit value-added tax and withholding tax by the 21st day of every month. According to a statement signed by Babatunde Fowler, the FIRS chairman, some companies have been found not to deduct these taxes at source. VAT is a consumption tax placed on a product whenever value is added at each stage of the supply chain – from production to the point of sale. Withholding tax, however, is deducted at source by organisations or bodies making payments to suppliers of goods and services. They are required to remit the deducted sum to the tax authority as payments are being made to suppliers/vendors. “It has come to the notice of the service that some companies do not deduct WHT/VAT from the compensation paid to their distributors contrary to provisions of the ‘Companies Income Tax (Rates, Etc. Deduction at Source (Withholding Tax) Regulations and Paragraph 3.8 of Federal Inland Revenue Service Information Circular No. 2006/02 of February 2006, which states that commission earned by distributors/dealers will be subjected to WHT and VAT,” he said. “Following this discovery, the Service hereby puts all companies, particularly those in the fast-moving consumer goods sector on notice that compensation due to their distributors and customers in the form of commission, rebates etc and by whatever means of payments, whether by cash, credit note or even goods-in-trade must be subjected to WHT/VAT at the appropriate rates as applicable and remit same to the FIRS accordingly on or before the 21st of every month.” Source: The Cable

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