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FIRS Releases The Income Tax (Common Reporting Standard) Regulations 2019

The Federal Inland Revenue Service (FIRS) recently released the Income Tax (Common Reporting Standard) Regulations (The Regulations). The Regulations seek to give effect to various international conventions, treaties and guidelines between Nigeria and other contracting States with respect to mutual administrative assistance, automatic exchange of financial account information and compliance with common reporting standards and the relevant provisions of the FIRS (Establishment) Act and Companies Income Tax Act relating to FIRS’ power to call for returns and access taxpayer’s records. The Regulations apply primarily to all Nigerian Financial Institutions, excluding government entities, international organisations, central banks and any other entity that presents a low risk of being used to evade tax and is defined in the domestic law as a Non-reporting Financial Institution. Pursuant to the Regulations, the affected Nigerian Financial Institutions (referred to as Reporting Financial Institutions – RFIs) are required to: Establish, maintain and document due diligence framework in line with Sections II-VII of the Common Reporting Standards (CRS) to enable them classify, determine the extent of background information requirements and reporting obligations of “Reportable Accounts” maintained by the institutions. Reportable Account is an account held by an individual or entity (including partnerships) that is tax resident in any country other than Nigeria or United States of America. Prepare annual information return relating to Reportable Accounts, in a specific format with effect from 2019 calendar year. Submit the returns electronically using a technology provided or approved by FIRS no later than 31 May of the year following the calendar year which the returns relate. In essence, the first return is due to be submitted on or before 31 May 2020. RFIs are mandated to submit “Nil” returns, where no “Reportable Accounts” have been identified. Store records relating to the returns, for at least 6 calendar years from the last year in which the records were relevant. The Regulations also contain anti-avoidance mechanisms to ensure that RFIs do not avoid any obligation imposed under the Regulations by engaging in arrangements and/or compromises with a purpose of avoiding such obligation. Furthermore, there are stiff penalties for non-compliance with obligations under the Regulations as described below: It is pertinent to note that FIRS has the discretion to exempt RFIs from the imposition of any of the above penalties where there is a reasonable excuse for the non–compliance or default. Exemption due to reasonable excuse shall remain valid even after the excuse has ceased provided that the failure was remedied within a “reasonable time”. However, failure as a result of fund insufficiency or reliance on another party, will not be considered a reasonable excuse. With the release of the Regulations, Nigeria joins other countries in striving towards a more transparent and global approach to taxation. Nonetheless, the impending implementation of the Regulations raises concerns such as: Possible breach of confidentiality and safeguard of data at operational level. Subjectivity in interpreting what constitutes “reasonable excuse” for the purpose of granting for exemption from the administrative penalties. Overall, all Nigerian Financial Institutions are urged to review the Regulations in detail, to ascertain applicability and compliance obligations. Source: Mondaq

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NESG advocates reduction in taxes, competitive economy

Tax news / Tobi Aminu

The Nigerian Economic Summit Group has emphasised the need for the government to reduce the number of taxes levied on businesses in the country. The NESG said out of about 3,000 forms of taxes operational across the country from the federal to the local government level, only four of them generated 96 per cent of government revenue. Ogun State, preparatory to the group’s summit slated for October 7 and 8. Jaiyeola also urged the Federal Government to ensure that modes of finance were prepared together with the budget. He said, “You can spend all the time analysing budget. The question is, to what extent do we take it seriously? Not only that we should have a budget, but also we should also have a finance bill. You don’t talk just about the budget; you also talk about how to get the money to fund the budget. “Part of the work we have done recently is to tell the government that there are so many taxes. There are over 3,000 taxes across Nigeria from federal to state and local government levels. Only four provide 96 per cent of government revenue. Part of the things we are telling the government is to streamline the taxes.” Jaiyeola stated that the theme of the summit, “2050: Shifting Gears,” would examine how the government could prepare for Nigeria’s population projected to be the third biggest in the world by 2050. The NESG CEO said the office of the Minster of Finance, Budget and National Planning had agreed to work with the group, noting that the summit would identify the key things to drive the economy. He explained that after the event, a “green book” which is a summation of all the agreements reached at the summit would be presented to the Federal Executive Council for consideration. “We also distil the conclusion into policy commissions where we have about 45 thematic areas, ranging from health, education, agriculture, infrastructure and even sport. “The policy commission is a collection of public and private sectors. Their role is to constantly engage the government to ensure implementation. “By 2050, it is established that if we go on present trajectory, Nigeria will be the third most populous nation in the world. The question is: how do we embrace that? “Our vision is that Nigeria must be an economy that is competitive, market-driven, innovative and inclusive. Part of our major problems is lack of inclusion.” Jaiyeola commended President Muhammadu Buhari for its new Economic Advisory Council and also urged the government to listen to its recommendations. Source: Punch

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Oyo exempts churches, mosques from tax net

TAX SERVICES / Tobi Aminu

The Oyo state government at the weekend exempted churches and mosques from paying levies and taxes to the coffers of the state. The government position was in sharp contrast to the immediate past administration which stipulated certain amount of money to be paid by religious houses, corporate bodies, among others as security levies. The Executive Assistant to Governor Seyi Makinde of Oyo state, Rev. Idowu Ogedengbe made this known at the thanksgiving mass to celebrate the 70th year birthday of the Catholic Archbishop of Ibadan diocese , Most Rev . Gabriel Abegunrin held at the Church of Ascension, Bodija, Ibadan. Ogedengbe spoke as the Publisher of the defunct Third Eye newspapers, Chief Akanni Aluko; the Ooni of Ife, Oba Adeyeye Enitan represented by Oba Fayemi Olumayowa; the President , Catholic Bishops Conference of Nigeria, Most Rev. Augustine Akubueze; Ekerefe of Erefe of Ife , and members of Olubadan Advisory Council including High Chief Eddy Oyewole nodded with enthusiasm. He clarified its position on the controversy on whether places of worship in the state are to pay taxes or not, following the criticism that greeted the move during the last administration. Though, he stated that any places of worship that do business , such as establishing of schools, university, hospital, bakeries, and so on must pay tax to the government since it was a profit making venture. Source: Punch

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High tax regime slowing business growth — Expert

TAX SERVICES / Tobi Aminu

The Head, Tax and Corporate Advisory Services, PwC Nigeria, Taiwo Oyedele, has said the high company income tax rate in the country is a disincentive for business growth. Oyedele, while speaking during the Finance Correspondents Association of Nigeria annual workshop, themed ‘Unlocking opportunities in Nigeria’s non-oil sector’, said Nigeria had one of the highest company income tax rates globally. According to him, Nigeria is among the top 10 in the world with highest income tax rate. Oyedele said, “We pay Company Income Tax at 30 per cent, education tax at two per cent and 10 per cent withholding tax on whatever is left. “If you add it together, it is more that 40 per cent already. If you now make a mistake of having a group and you say it is a holding company, that is another 30 per cent. Who does that?” Oyedele revealed that there existed a commencement rule, which was supposed to punish start-ups during commencement by making them pay tax twice. He noted that to address the challenge, operators in the private sector should focus on demanding removal of some of the disincentives that affected business operations. He said, “What I keep saying to government is that I can insist that I have a small pot and I must get 60 per cent of the pot by all means or I allow the pot to be big enough and then get 10 per cent of it. “Government must remove tax disincentives. One thing I am asking the business community is stop asking the government for incentives because they will think they are doing you a favour. Ask them to remove the disincentives that are not allowing us to do business.” Oyedele called on the authorities to change their thinking about taxation, saying the current approach had only made compliance difficult. According to him, the thinking of citizens around taxation is completely upside down. He said, “As a government, I should help you make money so that you can pay me tax; It is just common sense. Nigeria has a tax system that does not allow businesses to thrive, whether you are small or big. “The reason Nigeria cannot make money from tax, and it is not a curse, is that it continues to beat up the people at the bottom of the ladder. But they cannot give you what they do not have.” Oyedele said if the government could focus on the top one per cent rich and big companies, they would get the desired tax results. Source: Punch

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NASS must pass bill on VAT increase before implementation, Falana tells FG

Tax news / Tobi Aminu

Human Rights Lawyer, Femi Falana, has called on the Federal Government to propose a Money Bill to the National Assembly before the implementation of the increase in Value Added Tax. Falana told the News Agency of Nigeria in Abuja that the National Assembly erred by inviting the Minister of Finance and the Executive Chairman of Federal Inland Revenue Service to clarify issues of VAT increment. According to him, provisions of the constitution states that the President ought to have presented a Money Bill to be passed by the NASS before the increment. “It’s illegal. Under a democratic dispensation, you cannot impose tax or increase tax without a law made by the National Assembly or the State Assembly as the case may be. “In this case, it has to be realised that we are not under a military dictatorship. “By virtue of section 59 of the Nigerian Constitution, any increase, levy or tax will have to be presented to the National Assembly by way of Money Bill by the President, it has to be passed into law. “The Senate erred in law by inviting them to come and clarify. The National Assembly has invited the Minister of Finance and the Federal Inland Revenue Services to come and clarify. “No, the National Assembly must insist on its powers under Section 59 to pass a law to increase VAT or any tax, there can be no taxation without legislation. “The Federal Executive Council has no power under the Constitution to increase VAT or any tax in the country,” Falana said. NAN recalls that the Federal Executive Council had last Wednesday approved the increment of VAT from 5 per cent to 7.5 per cent. The Minister of Finance, Budget and National Planning, Mrs Zainab Ahmed, had explained that the increase would only begin after the VAT Act was amended by the National Assembly and after consultations with the state and local government areas as well as the Nigerian populace. Source: Punch

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P&ID representatives plead guilty to fraud, tax evasion

TAX SERVICES / Tobi Aminu

Two representatives of the Process and Industrial Development Ltd on Thursday pleaded guilty before the Federal High Court in Abuja to charges of fraud and tax evasion instituted against them in respect of the contract leading to the recent controversial judgment of a British court empowering the firm to seize about $9.6bn worth of Nigerian assets. The Economic and Financial Crimes Commission on Thursday arraigned P&ID Ltd, Virgin Island, its Nigerian affiliate, P&ID Nigeria Ltd on 11 counts of fraud and tax evasion. While P&ID Ltd, Virgin Island was represented by its Commercial Director, Mohammad Kuchazi, P&ID Nigeria Limited was represented by Adamu Usman, who is also a lawyer. Both men pleaded guilty to all the 11 counts read to them before Justice Inyang Ekwo on Thursday. Kuchazi was represented by his lawyer, Dandison Akurunwua, while Usman represented himself. They were accused of, among others, fraudulently claiming to have acquired land from the Cross River State Government in 2010 for the gas supply project agreement which led to the $9.6bn judgment. After the defendants pleaded guilty to the 11 counts, an EFCC investigator, Usman Babangida, was called to the witness box for review of facts which was not opposed by the defence. Documents relating to the controversial 2010 gas supply contract and EFCC’s investigation activities were tendered and admitted by the judge as exhibits without objection from the defence. The judge then went on to pronounce the two firms represented by the two men guilty. The prosecution led by Bala Sanga has asked Justice Ekwo to order the winding up of the company as the sentence for the offences. Source: Punch

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The FIRS Has Published Regulations On Common Reporting Standard

Tax news / Tobi Aminu

The Federal Inland Revenue Service (FIRS) has issued the Income Tax (Common Reporting Standard) Regulations, 2019 (CRS Regulations). This follows Nigeria’s signing of the Multilateral Convention on Mutual Administrative Assistance in Tax Matters (MAC) and the Multilateral Competent Authority Agreement (MCAA) on the Automatic Exchange of Financial Account Information, signed by Nigeria on 17 August 2017. Fundamentally, the CRS Regulations and the various agreements signed by the FIRS will allow it to receive specified information on the bank accounts held by Nigerian tax residents in up to 105 countries. In exchange, the FIRS will be obligated to provide similar information to these other countries. The CRS Regulations have an effective date of 1 July 2019 and require qualifying Nigerian Financial Institutions to submit an electronic information return (i.e. a return that reports specified financial account information of certain persons) to the FIRS on an annual basis. The information is to be provided in respect of “reportable accounts”, which subject to certain exemptions, are the Nigerian accounts of persons who are resident for tax purposes in a foreign country with which Nigeria has signed the relevant exchange of information agreement. Other relevant provisions include: First reporting year: starting from 2019 calendar year Filing deadline for information return: 31 May of the year following the calendar year to which the returns relate Penalties for non-compliance: Failure to comply with duty or obligation imposed by the CRS Regulations: ₦10 million in the first instance in addition to ₦1 million/month Failure by Financial Institution to file information return: ₦10 million in the first instance in addition to ₦1 million/month Furnishing false or incorrect information: ₦5 million Failure by Financial Institution or any person to comply with the FIRS’ requirement in the exercise of its powers: ₦1 million in the first instance in addition to ₦100,000/month Failure by Financial Institution to keep records in accordance with the Regulations: ₦1 million in the first instance in addition to ₦100,000/month Source: Mondaq

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Stop crying wolf on VAT, BMO attacks PDP

Tax news / Tobi Aminu

The Buhari Media Organisation (BMO) has cautioned the Peoples Democratic Party (PDP) to stop crying wolf or seeing ghosts where none exist, especially over federal government’s plan to increase the Value Added Tax (VAT) from 5 per cent to 7.5 per cent. Reacting to the PDP’s rejection of VAT, the group warned the opposition party to stare clear of matters that it does not have a full understanding of. It also urged the party not to undermine a patriotic and genuine effort of President Muhammadu Buhari’s administration to raise the needed resources to address some of the major infrastructural needs of Nigerians. The PDP had earlier called on the federal government to reverse its decision to increase VAT, warning that such planned increase would put more pressure on families and businesses and result in an increase in costs of goods and services. In a statement signed by its Chairman, Niyi Akinsiju and Secretary, Cassidy Madueke, BMO said if the PDP is genuinely worried that Nigerians could not bear the burden of the 2.2 per cent marginal increase in VAT “under the prevailing economic situation in the country,” the party should have first demonstrated its patriotism and genuine concern for Nigerians by directing its Governors, who were part and parcel of the decision to effect increase in the country’s tax regime, to reject the idea rather than calling on the Federal Government to reverse its decision on the new policy. “In any case, States and Local Governments stand to benefit more from the increase in VAT; the states get 50 per cent of the VAT collection, Local Governments get 35 per cent, leaving the federal government with a paltry 15 per cent. “So, it stands to reason that this particular increase in VAT is another bail-out mechanism designed by President Muhammadu Buhari to assuage the woes of those perennially broke tiers of government.” The group added that even with the new marginal increase, Nigeria has one of the lowest VAT rates in the world, “and considering the huge infrastructural deficit the country is facing today, the current government has to think outside the box and look for how best to raise resources to meet some of the major needs of its people and also ensure that the impact does not put much burden on the citizenry. “And this is what the government is trying to do with this marginal increase in VAT.” BMO reminded PDP and Nigerians that VAT is not paid on domestic foodstuffs and local transportation. Other items excluded from VAT are drugs, medical equipment, educational materials and other items that generally affect the purse of the man on the street. “Essentially, VAT is payable on luxury goods, cigarette, wine, air travel and other luxury items that are the exclusive preserve of the rich and the opulent. “Also in the light of global trend, it has become imperative for our government to harmonise Nigeria’s VAT rate with what obtains within the ECOWAS region. Even with the marginal increase of 2.2%, Nigeria is still far below all the African countries in the VAT rate regime. “So what is PDP’s beef about; can it be that those who have grown rich from robbing our commonwealth, most of whom are in the PDP, are now going to pay more for their flamboyant lifestyle? “It is highly unfortunate that a party that presided over the highest figure of oil receipts in the nation’s history now constitutes itself as a stumbling block to frustrate all genuine efforts of the current administration, which has shown much interest and has demonstrated strong capacity to address the poor infrastructure problems PDP fostered on the nation.” BMO then called on all Nigerians to ignore the nay-sayers, and rally round President Muhammadu Buhari who has committed himself to good governance, and life more abundant to the Nigerian masses. Source: The Sun

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Transparency In Tax Revenues

Tax news / Tobi Aminu

Experts have called on the federal government to restructure the finances of the country such that the share of the nation’s revenue that it earns from taxation is judiciously utilised calling for more transparency. The federal government last week proposed an increase in Value Added Tax (VAT) by 44 per cent to 7.2 per cent from five per cent and the introduced the Police Trust Fund levy. This it said was to increase the country’s revenue base. The Nigerian Police Trust Fund Act which was passed by the National Assembly in April 2019, and signed into law by the President on 2 July 2019, imposes a levy of 0.005 per cent of the net profit of companies operating business in the country. According to the president of the Chartered Institute of Taxation of Nigeria (CITN), Dame Olajumoke Simplice, this is important because of the need for government to invest in infrastructure. “Let us see improvements in infrastructure especially power, roads, education good health. When all these are put in place, you will see that Nigerians are good people and good citizens. We only need good leadership, we need to see that government means well for us, we will pay our taxes. “We Nigerians should now start to hold the government responsible, let us see what the money is used for. Let us make sure that money is used to provide the goods and services that the masses of this country needs. Let us ensure that the tax money is working for the stakeholders, the taxpayers.” Commenting on the taxes, Head of Tax and Corporate Advisory Services at PwC Nigeria, Taiwo Oyedele stated the need for government to block leakages as a way of growing its usable revenue noting that imposing more taxes on businesses is counter-productive. He noted that the police trust fund levy which takes N5 from every N100,000 of net profits is a bad move and it is not in the interest of Nigerians. “You say police needs funds, that is a fact and you say let’s levy businesses so that we can fund the police, that is a very wrong move. On his part, partner & chief economist at PwC Nigeria, Andrew Nevin said there is need for government to focus on the top echelon of the Nigerian society and make sure they pay taxes first, instead of imposing new taxes on middle class citizens and creating administrative bottlenecks for businesses. Source: Leadership

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Folorunso Alakija reacts to VAT increment

Tax news / Tobi Aminu

Executive vice Chairman of Famfa oil has described the planned increased of the Value Added Tax (VAT) from its current 5 per cent to 7.5 per cent by the federal government as a threat to entrepreneurs in the country. The Federal Executive Council (FEC) had approved the increment of the VAT to 7.5 per cent from 5 per cent. The Minister of Finance, Budget and National Planning, Zainab Ahmed disclosed this to state house correspondents at the end of the cabinet meeting on Wednesday, September 11, 2019. Alakija, who is the richest woman in Africa disclosed this in an interview, noting that if the proposed VAT increment should be fully implemented, it will be difficult for entrepreneurs that operate within the shores of the country to make money. “Increasing VAT will make it more difficult for entrepreneurs to be able to make as much money as they would have liked to. But it is also what the government need for nation-building, because it is tax that the government earns as income. Without tax, no government can really stand on its legs. So long that it is being ploughed back into the areas where they are needed, and they are not growing wings.” If approved by the federal lawmakers, the new VAT rate will take effect in 2020. In Nigeria, VAT replaced the sales tax in 1994 and was pegged at 5 per cent by the military government of Sani Abacha. In 2007, former President Olusegun Obasanjo increased VAT to 10 per cent on the eve of his departure from office but it was reversed by his successor, Umaru Musa Yar’Adua, following opposition from the Labour Unions. Meanwhile, it is important to note that despite wide criticisms that have greeted both the VAT increment, the Federal Government considers the move as the most potent channels to meet the new minimum wage implementation. Source: Blueprint

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