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In the current Nigerian business environment, companies face the need to adopt effective strategies to maintain competitiveness, ensure growth, and enhance profitability. Business restructuring is one such strategy to achieve optimal performance. Inefficient business structures, coupled with external factors like poor infrastructure and adverse government policies, can pose significant challenges to companies. Additionally, regulatory requirements and legislations may necessitate business restructuring, as seen in the banking sector reforms and local content requirements in various industries. Business restructuring can take various forms, from the outright sale of equity interest to mergers and acquisitions (M&A). Common restructuring forms in Nigeria include the sale or purchase of crown assets, business combinations (such as share purchase/acquisition, mergers, acquisitions, demergers, and asset/business spin-offs), and capital reorganization (including debt-to-equity conversion, capital reduction, share buyback, stock split, and stock consolidation). These restructuring activities may involve contractual agreements, legal structures, and statutory provisions. Regardless of the motive behind business restructuring, it is crucial to consider various tax implications for a tax-efficient restructuring exercise. This article focuses on the key tax considerations for business restructuring, with an emphasis on M&A, which is a prevalent form of restructuring in Nigeria. For professional advice on Accountancy, Transfer Pricing, Tax, Assurance, Outsourcing, online accounting support, Company Registration, and CAC matters, please contact Inner Konsult Ltd at www.innerkonsult.com at Lagos, Ogun state Nigeria offices, www.sunmoladavid.com. You can also reach us via WhatsApp at +2348038460036.

During the life cycle of a business, decisions to acquire or divest business lines may be made to create synergies or improve financial performance. In the telecommunications industry in Nigeria, major companies engaged in significant asset transfers, selling off around 30,000 base transceiver stations tower assets in deals exceeding US$300 million in 2014/2015. Economic challenges, such as the recession experienced from 2016 to 2017, further impacted businesses, necessitating careful evaluation of entry strategies for investors. This analysis explores the reasons why an asset transfer may be chosen over a share transfer, along with key tax considerations in negotiating and concluding such transactions. Why Asset Deals? Asset transfers are generally considered less preferable compared to share transfers due to complexities and tax exposure at various transaction points. Purchasers are subjected to stamp duties and Value Added Tax (VAT), while sellers may incur Capital Gains Tax (CGT) on gains from asset disposal and potential income tax liability. Despite these considerations, asset transfers offer tax benefits, especially for fully depreciated assets. Buyers can create a tax base for capital allowance purposes, and a step-up advantage allows assets to be recorded at fair market value for potential cost recovery. Tax Considerations in Asset Transfers: While asset transfers may involve tax inefficiencies, the potential for cost recovery through capital allowance and step-up advantages can make them a viable option for certain business scenarios. For professional advice on Accountancy, Transfer Pricing, Tax, Assurance, Outsourcing, online accounting support, Company Registration, and CAC matters, please contact Inner Konsult Ltd at www.innerkonsult.com at Lagos, Ogun state Nigeria offices, www.sunmoladavid.com. You can also reach us via WhatsApp at +2348038460036.

The Nigerian tax authorities, led by the Federal Inland Revenue Service (FIRS) and State Internal Revenue Services, have been actively working to enhance tax collections and increase government revenue through various schemes and tax amnesty programs. Despite these efforts, the level of tax compliance in Nigeria remains relatively low. A recent report from the International Monetary Fund (IMF) indicates that only about 10 million people out of a labor force of approximately 77 million are registered for taxes in the country. This low tax registration rate creates a narrow tax base, limiting the government’s ability to collect taxes and impacting overall revenue generation. Additionally, it places a significant burden on existing taxpayers who are often targeted for audits and tax enforcement measures. The Informal Sector: The informal sector encompasses economic activities that operate with limited government regulation and organizational structure. It includes micro, small, and medium-scale enterprises, traders, and artisans, constituting a substantial portion of the Nigerian economy. The informal sector is a critical component that significantly contributes to the country’s GDP. Despite efforts to improve the tax-to-GDP ratio, currently standing at 6.1%, the informal sector remains largely untapped. Effectively subjecting this sizable segment of the economy to taxation is essential for a substantial improvement in the tax-to-GDP ratio. Challenges of Taxing the Informal Sector: One of the major challenges in taxing the informal sector is the lack of proper record-keeping by most businesses operating within it. Many informal sector businesses do not maintain accurate records of their daily transactions, including proper books of account that would enable the production of audited accounts for tax computation. Operators in this sector often prioritize business growth over record-keeping, making it difficult to assess their financial position independently. Another challenge is the commingling of personal and business funds. Informal sector businesses commonly use the same bank accounts for both business and personal transactions, mix personal loans with business finances, and withdraw money from the business without proper documentation. This lack of financial separation complicates the accurate evaluation of a business’s financial standing for tax assessment purposes. For professional advice on Accountancy, Transfer Pricing, Tax, Assurance, Outsourcing, online accounting support, Company Registration, and CAC matters, please contact Inner Konsult Ltd at www.innerkonsult.com at Lagos, Ogun state Nigeria offices, www.sunmoladavid.com. You can also reach us via WhatsApp at +2348038460036.

Intangible assets are crucial for businesses, serving as key differentiators that drive revenue, manage costs, or achieve both objectives. Businesses often make substantial investments in developing, enhancing, maintaining, and protecting unique and valuable intangibles to gain a competitive edge. For instance, technology companies invest in Research & Development (R&D) for breakthrough technologies, while consumer markets businesses focus on advertising and brand promotions. When entities engage in intangibles transactions with related parties, determining appropriate compensation for the intangible asset becomes imperative. However, assessing these transactions is challenging due to the nature of intangibles—non-physical assets that are difficult to identify, determine ownership, and value accurately. As a result, intangibles transactions pose a high-risk exposure to taxpayers in Transfer Pricing (TP). The revised TP Regulations offer guidance on analyzing intangibles transactions, addressing their value and treatment. This article explores this guidance, discusses its implications, suggests ways to mitigate TP risks, and proposes changes to the TP Regulations to reduce the risk of double taxation and enhance the ease of doing business in Nigeria. Defining Intangibles: While the revised TP Regulations do not explicitly define intangibles, the OECD Transfer Pricing Guidelines provide a comprehensive definition. According to paragraph 6.6 of the OECD Guidelines, intangibles are “something which is not a physical asset or a financial asset, capable of being owned or controlled for use in commercial activities, and whose use or transfer would be compensated if it occurred in a transaction between independent parties in comparable circumstances.” To qualify as an intangible, an asset must meet specific criteria, such as being a non-physical or financial asset, capable of ownership or control for commercial use, and subject to compensation in a transaction between independent parties under comparable circumstances. The OECD Guidelines further categorize intangibles into marketing and trade intangibles. Marketing intangibles pertain to activities that facilitate the commercial exploitation of a product or service, with significant promotional value. Examples include trademarks, trade names, customer lists, and customer relationships. For professional advice on Accountancy, Transfer Pricing, Tax, Assurance, Outsourcing, online accounting support, Company Registration, and CAC matters, please contact Inner Konsult Ltd at www.innerkonsult.com at Lagos, Ogun state Nigeria offices, www.sunmoladavid.com. You can also reach us via WhatsApp at +2348038460036.

Are you earning income through various streams or investments? Do you want to ensure the tax efficiency of your investments and facilitate a smooth wealth transfer to future generations? If so, strategically managing your investments through a well-structured and properly managed investment vehicle can be a solution. High-net-worth individuals (HNIs) often have diverse investments, including equity interests in companies, real estate holdings, and financial portfolios. Best practices suggest holding these investments through an investment vehicle rather than direct ownership. Such a vehicle serves as a conduit for HNIs to deploy funds into current and future projects while facilitating wealth transfer to successive generations. Investment vehicles typically take the form of holding companies or private trusts. Both options have distinct characteristics, benefits, drawbacks, and tax implications. This article focuses on wealth planning and management through private trust arrangements and explores the associated tax implications. Private Trust: A trust is a fiduciary relationship where the settlor (creator of the trust) transfers assets or property to a trustee. The trustee holds and manages these assets for the benefit of the beneficiaries—the individuals for whom the trust is created. In the context of wealth planning, a private trust is established to benefit specific individuals, and it can be set up locally or offshore. Key Elements of a Private Trust Structure: A trust is not a separate legal entity; instead, it relies on the trustee to manage the assets within the trust. The trustee can be a professional with financial expertise, a corporate entity, or even a trusted friend or relative of the settlor. In a private trust, the HNI transfers ownership (legal title) of current investments to the trust and directs future investments in the name of the trust. This strategic approach helps consolidate and manage the HNI’s assets while offering flexibility and potential tax advantages. For tax efficiency and wealth preservation, private trusts provide a structured mechanism for HNIs to navigate the complexities of diverse investments and ensure a seamless transfer of wealth to succeeding generations. For professional advice on Accountancy, Transfer Pricing, Tax, Assurance, Outsourcing, online accounting support, Company Registration, and CAC matters, please contact Inner Konsult Ltd at www.innerkonsult.com at Lagos, Ogun state Nigeria offices, www.sunmoladavid.com. You can also reach us via WhatsApp at +2348038460036.

Like individuals, businesses should undergo periodic health checks to ensure their survival. This is particularly crucial in the current economic landscape, where the Nigerian government is striving to generate substantial non-oil revenue. With a targeted non-oil revenue of ₦5.51 trillion in 2020, businesses need to proactively address tax compliance and potential risks. This becomes even more pressing due to the uncertainty surrounding tax positions in the country’s laws and recent judicial precedents on contentious tax matters. In this context, a tax health check serves as a comprehensive review of a taxpayer’s tax and accounting records to assess compliance with relevant tax laws. The exercise aims to quantify potential tax exposures, identify areas of improvement, and evaluate strategies for enhanced compliance. The purpose of a tax health check includes: In summary, a tax health check is a proactive and strategic approach for businesses to navigate the evolving tax landscape, manage risks, and ensure compliance with tax laws. Given the government’s increased focus on non-oil revenue, businesses should consider periodic tax health checks as part of their overall risk management and compliance strategy. For professional advice on Accountancy, Transfer Pricing, Tax, Assurance, Outsourcing, online accounting support, Company Registration, and CAC matters, please contact Inner Konsult Ltd at www.innerkonsult.com at Lagos, Ogun state Nigeria offices, www.sunmoladavid.com. You can also reach us via WhatsApp at +2348038460036.

The internet has profoundly influenced various aspects of human life, creating a global business value chain that transcends borders and geographic locations. Studies have shown a positive correlation between internet access and the growth of a nation’s Gross Domestic Product (GDP), indicating that the internet has the potential to enhance business efficiency, market share growth, outreach expansion, and employment opportunities. Businesses with a digital presence can generate substantial revenue from non-resident jurisdictions without a physical presence in those countries. Notable examples include Facebook and Google, which derive a significant portion of their revenue from outside their home countries. In Nigeria, both local and foreign businesses actively participate in various social media platforms, fostering interactions between suppliers and consumers. However, tax administrators globally face challenges in taxing the significant wealth generated by digital economy businesses that lack a physical presence in different tax jurisdictions. This article delves into the issues associated with taxing social media and online activities in Nigeria, examining the existing legislative framework for administering applicable taxes. The Nigerian Tax Framework for Online Businesses: In recent years, the Nigerian government has intensified efforts to ensure that online businesses contribute their fair share of taxes in accordance with existing tax laws. Nigeria, with its large population, is positioned to benefit substantially from the global digital economy. However, the country’s tax-to-GDP ratio has remained relatively low at 6%, prompting the government to explore initiatives aimed at widening the tax net. Before 2020, taxing non-resident companies in Nigeria was contingent on having a physical presence or a fixed base. The Finance Act of 2019 introduced the concept of Significant Economic Presence (SEP), considering a company’s economic activities to determine its taxable presence. The Minister of Finance, Budget, and National Planning subsequently issued the SEP Order to complement the provisions of the Companies Income Tax Act (CITA). The SEP concept considers various factors to determine whether a non-resident company is liable to income tax in Nigeria. According to the SEP Order, a foreign entity engaging in digital transactions with a Nigerian resident is deemed to have created a SEP in Nigeria if it derives a turnover or income exceeding ₦25 million from activities such as streaming or downloading digital content, transmitting data collected about users in Nigeria, providing intermediary services through a digital platform, using a Nigerian domain name (.ng), or registering a website address in Nigeria. The introduction of the SEP concept aims to broaden the tax net, align with global best practices, and facilitate tax compliance for multinational companies participating in Nigeria’s digital economy. Section 55 of the Finance Act (2020) mandates companies meeting the SEP criteria to submit tax returns, audited financial statements, and other relevant documents. In conclusion, Nigeria’s efforts to tax online businesses reflect a global trend as countries seek to adapt their tax frameworks to the evolving digital economy. The SEP concept represents a significant step toward addressing the taxation challenges posed by the digital economy. For professional advice on Accountancy, Transfer Pricing, Tax, Assurance, Outsourcing, online accounting support, Company Registration, and CAC matters, please contact Inner Konsult Ltd at www.innerkonsult.com at Lagos, Ogun state Nigeria offices, www.sunmoladavid.com. You can also reach us via WhatsApp at +2348038460036.

For over a decade, public companies in various countries, including the United States, Canada, Brazil, and Turkey, have been mandated to implement Internal Control over Financial Reporting (ICFR), particularly as part of issuer audits. While some organizations may perceive ICFR requirements merely as regulatory obligations, they might overlook the opportunities to unlock hidden value and enhance their overall internal control system. Unfortunately, discussions around ICFR often focus on meeting regulatory expectations, neglecting the crucial aspect of understanding the intent behind Internal Control over Financial Reporting. This oversight is particularly relevant in Nigeria, where new regulations from the Securities and Exchange Commission (SEC) require listed entities to comply with ICFR by the end of their fiscal year in 2021. In this article, we will delve into the intent, importance, and challenges of ICFR, considerations for its implementation, and best practices for compliance. Why is ICFR Important? In the 1990s, high-profile cases of corporate fraud, such as those involving Xerox and Global Crossing in the USA, eroded investor confidence and prompted a reevaluation of regulatory standards for financial reporting. The fraudulent activities, including publishing false financial statements to manipulate stock prices, led to a significant loss of market value, totaling almost $6 trillion. In response to these events, the Sarbanes-Oxley Act (SOX) of 2002 was enacted by the United States Congress. SOX imposed stringent penalties on wrongdoers and mandated reforms to securities regulations to protect investors from fraudulent financial reporting. This marked the beginning of the era of ICFR, aiming to enhance the credibility of corporate financial statements. Compliance Requirement in Nigeria The Securities and Exchange Commission (SEC) in Nigeria issued guidelines for the implementation of Sections 60-63 of the Investment Securities Act, requiring public companies to report on the effectiveness of their ICFR in their annual reports starting from the December 2021 financial year-end. Quoted companies in Nigeria are obligated to undergo an integrated audit, including an external auditor’s assessment of ICFR effectiveness and an annual managerial evaluation of internal controls. Objective of Internal Control over Financial Reporting ICFR aims to safeguard the interests of investors and stakeholders by preventing fraud and financial crimes resulting from poor reporting by publicly traded companies. Regulatory bodies worldwide view ICFR engagements as opportunities for public companies to enhance the quality and efficiency of their financial reporting practices. Understanding the objective of ICFR underscores its importance in maintaining the integrity of financial reporting systems. For professional advice on Accountancy, Transfer Pricing, Tax, Assurance, Outsourcing, online accounting support, Company Registration, and CAC matters, please contact Inner Konsult Ltd at www.innerkonsult.com at Lagos, Ogun state Nigeria offices, www.sunmoladavid.com. You can also reach us via WhatsApp at +2348038460036.

Private trusts serve as effective tools for wealth succession, involving a fiduciary relationship among the trust creator (settlor), trustee, and beneficiaries. In addition, a protector is often appointed to oversee the trustee’s activities in the interest of the beneficiaries. Understanding the responsibilities of each party is crucial for the success of the trust arrangement, aligning with the settlor’s goals. While there is no specific regulation on private trusts in Nigeria, the English Trustees Act of 1893, Trustee Investment Act 1957, and English common law principles govern trusts in the country. Responsibilities of Parties in a Private Trust Arrangement: Key Notes for Parties in a Trust Arrangement: Trust Creator (Settlor): These key considerations ensure clarity, prevent misinterpretation, and safeguard the interests of all parties involved in the private trust arrangement. A well-structured private trust can be a powerful tool for wealth succession and the attainment of the settlor’s objectives. For professional advice on Accountancy, Transfer Pricing, Tax, Assurance, Outsourcing, online accounting support, Company Registration, and CAC matters, please contact Inner Konsult Ltd at www.innerkonsult.com at Lagos, Ogun state Nigeria offices, www.sunmoladavid.com. You can also reach us via WhatsApp at +2348038460036.

The global demand for energy is outpacing the existing capacity for energy generation, and concerns about a potential energy crisis have intensified due to the Russian invasion of Ukraine. The adoption of alternative energy solutions has become imperative to ensure energy security and meet the growing demand, particularly as economies recover from the impact of the COVID-19 pandemic. Renewable energy (RE) stands out as a crucial tool for addressing energy access deficits, facilitating energy transition, and fostering economic growth in various regions worldwide. Given Nigeria’s abundant renewable energy sources, such as sunlight, wind, bio-waste, and tidal waves, widespread adoption of RE could propel the nation towards sustainable economic development. Nigeria, as the largest economy in Africa, faces severe economic constraints due to an unreliable power supply, resulting in a substantial energy gap. According to the World Bank, as of February 2021, 85 million Nigerians lacked access to grid electricity, constituting 43% of the population. This energy access deficit has significant economic implications, with annual losses estimated at ₦10.1 trillion, equivalent to about 2% of Nigeria’s Gross Domestic Product (GDP). To address this energy crisis and improve the erratic power situation, the widespread adoption and deployment of RE in Nigeria is crucial. This initiative can be strengthened with government interventions to incentivize both the supply and demand of renewable energy. This article explores potential measures and interventions that Nigeria can implement to create a Renewable Energy ecosystem, addressing its current energy deficit and unlocking economic opportunities for operators. The envisioned ecosystem will contribute to national growth, support the country’s energy transition agenda, and align with its commitment to achieving net-zero carbon emissions as declared at the 2021 UN Climate Change Conference (COP26). Potential Supply-Side Interventions Globally, supply-side interventions have proven effective in mitigating risks and reducing costs associated with developing Renewable Energy products. This, in turn, makes these products more economically viable for consumers, leading to increased accessibility. By lowering production costs, RE companies can achieve internal economies of scale and attract new entrants, fostering competition and driving down product prices. This not only benefits consumers but also encourages companies to explore new markets, even in remote areas where distribution costs may be higher. Supply-side interventions can take various forms, including grants, concessional financing, and results-based financing for operators in the RE sector in Nigeria. These interventions aim to incentivize investments in the country’s electricity sector, making it more attractive for RE operators. As a result, the cost-effectiveness of renewable energy products is enhanced, contributing to the overall success and sustainability of the renewable energy ecosystem in Nigeria. For professional advice on Accountancy, Transfer Pricing, Tax, Assurance, Outsourcing, online accounting support, Company Registration, and CAC matters, please contact Inner Konsult Ltd at www.innerkonsult.com at Lagos, Ogun state Nigeria offices, www.sunmoladavid.com. You can also reach us via WhatsApp at +2348038460036.