Tax preparation services

As the battle over unpaid $2billion tax arrears between MTN Nigeria and Attorney-General of the Federation (AGF), Abubakar Malami persist, the Chief Executive Officer of MTN Group, Rob Shuter, has said that the nation’s tax authorities have no particular quarrel with the firm various tax assessments. The telecommunication company boss also, said that the AGF is “playing games” over the federal government’s demand of $2 billion tax arrears from the company. Speaking at a conference call where MTN’s 2018 annual results were presented to executives and stakeholders of the company, Shuter said, “Now, of course, what’s odd about the Nigeria-situation is it’s not the Commissioner for Inland Revenue that we have the dispute with. It’s the Attorney General, who is really not mandated to collect the tax. “So the legal process is basically saying you’re playing a game that you’re not meant to be playing. And when we talk to the tax authorities they have no particular quarrel with where we are with our various assessments. “So either we get the thing chucked out early on and the issue is finished, or it is just one of these lingering things that roll around in the system for a while. And personally, I don’t know which way it’s going to play out. “I’m just absolutely adamant that we’re a responsible company, we have paid the taxes we had to pay, and the tax authorities themselves aren’t saying that we owe them anything. So I think we’ve just got to stare this one down.” Although, the hearing of the suit against the AGF first scheduled for November 8, 2018, has been adjourned to March 26. It would be recalled that in September 2018, Malami had written to MTN Nigeria, demanding a payment of $2 billion in tax arrears. He broke the amount down to a 10-year period for import duties, Value Added Tax (VAT) and withholding taxes on foreign imports/payments. MTN Nigeria had denied any wrongdoing, saying it had fully settled all outstanding taxes. The telco also sued the AGF.   Source: Dailytimes

Introduction  The Federal Inland Revenue Service (FIRS) has issued Guidelines on Mutual Agreement Procedure (MAP) in Nigeria and Certificate of Residency Forms for taxpayers seeking to take advantage of the MAP. Mutual Agreement Procedure: MAP is a dispute resolution mechanism designed to resolve international tax disputes arising from inconsistent interpretations of double tax agreement (DTA) provisions, which may result in double taxation for taxpayers.  Nigeria’s DTAs contain MAP provisions that enable taxpayers approach Competent Authorities (CAs) in Nigeria or those in jurisdictions of Nigeria’s treaty partners to seek redress where they believe they are not being taxed in accordance with the provisions of the relevant DTA.  The MAP Guidelines: The Guidelines provide guidance to taxpayers on how to obtain assistance from the Nigerian CA; and how corresponding adjustments would be applied in the event of transfer pricing (TP) adjustments.  Scenarios requiring: MAP Taxpayers may require assistance from the CA where there are disputes relating to:  a)transfer pricing adjustments; b)dual residence status; c)attribution of profits of a permanent establishment; d)levy of withholding taxes beyond what is permitted by the applicable DTA; and e)uncertainties relating to the characterisation or classification of an item of income arising from the other jurisdiction. Request for assistance: Before submitting a MAP request, a taxpayer is required to carry out pre-filing consultations (a meeting or written correspondence) with the FIRS. This should contain a summary of the facts of the case and reasons for the MAP request. State Boards of Internal Revenue (SBIR) may also participate. Where the outcome of the pre-filing consultation is positive, taxpayers would be expected to submit a detailed written request for consideration. A request for MAP would not affect the requirement regarding any disputed tax liability. Timing of MAP:  requests Although the timeframe for presenting a case for the CA’s assistance depends on the specific terms of the DTA invoked, taxpayers are expected to present their case within 3 years of receipt of the notice of assessment.   Conditions for acceptance: The Nigerian CA will accept a MAP request where: the issue relates to a foreign country with which Nigeria has an in-force DTA; there is evidence that the actions of one or both countries will result in taxation that is not in accordance with the DTA; the taxpayer notifies the Nigerian CA within the acceptable timeframe;  the issue is not one that either CA has decided not to consider as a matter of policy.  Once a request has been accepted, the Nigerian CA would try to resolve the issue on its own. Where this is not possible, the Nigerian CA will notify the CA in the other country of its intention to commence the MAP. The taxpayer may withdraw the request for MAP at any time before an agreement has been reached between the CAs. Likewise, the Nigerian CA may terminate the MAP in certain circumstances.  Role of the taxpayer: MAP negotiations are between the CAs, as such the taxpayer’s role is limited to presenting its views and facts. This may involve making presentations to the CAs, where necessary.  Notification of agreement; The Nigerian CA will notify the taxpayer in writing of any agreement that has been reached during the MAP. Where the taxpayer is not satisfied with the outcome of the MAP, the taxpayer may seek legal remedy.    If the taxpayer accepts the decision of the MAP, a request for refund of taxes or reassessment of tax to reflect the decision of the MAP must be filed by the taxpayer within 3 months of the decision, but not later than 6 years after the MAP decision. Takeaway: The Guidelines bring Nigeria closer to international standards as it affords taxpayers an additional avenue for resolving jurisdictional double taxation tax dispute. However, considering Nigeria’s limited treaty network, it remains to be seen how far reaching the impact of the MAP would be on Nigerian taxpayers   Source: Mondaq

The shares of Seplat Petroleum Development Company Plc fell 3.5 per cent yesterday as investors reacted negatively to the audited results of the company for the year ended December 31, 2018. The shares fell from N619.00 to N596.90 per share. The firm, which is listed on the Nigerian Stock Exchange (NSE) and London Stock Exchange (LSE) yesterday released its audited results. Although the company recorded higher revenue, profit after tax (PAT) fell by 44.6 per cent. Specifically, Seplat posted revenue of N228.4 billion in 2018, up by 65.2 per cent from N138.3 billion recorded in 2017. Cost of sales rose 48 per cent from N73.4 billion to N108.6 billion, while gross profit jumped by 84.6 per cent to N119.8 billion from N64.9 billion in 2017. Net finance cost fell by 31.8 per cent to N14.3 billion, from N20.9 billion in 2017. Profit before tax (PBT) increased by 499 per cent from N13.5 billion to N80.6 billion. However, PAT fell from N81.1 billion to N44.9 billion due to debt of N35.7 billion in 2018, compared with a tax credit of N67.7 billion in 2017. The board of directors has recommended a dividend of N18 per share. The Chairman of Seplat, ABC Orjiako had disclosed plan of the company to invest more in its gas business in last year so as to boost revenue and deliver more returns to investors. “Our strategy to diversify and grow our sources of income through the expansion of our gas business continues to gain momentum. Since the government launched various initiatives to stimulate investment in the gas sector, including opening the Domestic Supply Obligation (‘DSO’) price to commercial market forces, Seplat has been at the forefront of gas commercialisation and made substantial investments in support of the government’s energy agenda,” he said. The Chief Executive Officer of Seplat, Austin Avuru had said the company registered strong cash flow performance and significantly strengthened the balance sheet the previous year. “Our proactive and decisive management coupled with the strong underlying fundamentals of the business have seen us emerge from an exceptionally challenging period a much fitter and stronger business that is well equipped to deliver long-term value for our shareholders,” he said. Meanwhile, the the three-day bullish run in the domestic equities market was halted yesterday as the NSE All-Share Index declined 0.16 per cent to close at 32,121.74.   Source: Thisday

Guaranty Trust Bank (GTBank) Plc has announced improved performance for the year ended December 31, 2018 and recommended a final dividend payment of 245 kobo per share. The bank recorded gross earnings for the year grew by 3.7 per cent to N434.7billion, from N419.2billion reported in 2017. Its net interest income fell from N246.663 billion to N222.433 billion, while net fee and commission income improved from N40.732 billion to N50.470 billion in 2018. Impairment charges reduced significantly from N12.169 billion to N4.906 billion,. GTBank ended the year with profit before tax of N215.6 billion, representing a growth of 9.1 per cent over N197.7billion recorded the previous year, while profit after tax (PAT) stood at N184.639 billion compared with N167.913 billion posted in 2017. The bank’s customer deposits increased by 10.3 per cent to N2.274trillion from N2.062trillion in December 2017, while loan book dipped by 12.9 per cent from N1.449 trillion in 2017 to N1.262trillion in 2018. The bank is proposing final dividend of N2.45 per share in addition to interim dividend of 30 kobo bringing total dividend for 2018 financial year to N2.75. Commenting on the results, the Managing Director/CEO of GTBank Plc, Mr. Segun Agbaje, said: “In 2018, our focus on staying nimble, strengthening customer relationships and driving our digital-first strategy paid off. We successfully navigated the pressures of our challenging and radically changing business environment, recorded growth across key financial indices and reaffirmed our position as one of the best performing and well managed financial institutions in Africa.” According to him, the performance reflects, not just the fundamental strength of the brand, but also its commitment to its values of excellence, creating value for all stakeholders and putting its customers first in everything that it does. “Driven by these values, we are building the bank of the future by pairing the best of our business with the massive potential of digital technologies to create Africa’s first integrated and trusted platform; Habari,” Agbaje said. In recognition of the bank’s bias for world class corporate governance standards, excellent service delivery and innovation, GTBank has been a recipient of numerous awards over the years. Some of the bank’s awards in 2018 included: Bank of the Year – Nigeria from the Banker Magazine, Best Banking Group and Best Retail Bank Nigeria from World Finance Magazine, Most Innovative Bank from the African Investor, and Best Digital Banking Brand in Nigeria from the Global Brands Magazine.   Source: Thisday

The Federal Inland Revenue Service (FIRS) has disclosed that a total of N12.62 trillion was generated as revenue from  2016 to 2018. This was revealed in a document made available to newsmen by the Head of Communications and Servicom Department of the agency, Wahab Gbadamosi. N3.3 trillion was generated in 2016, N4.02 trillion in 2017 and N5.32 trillion was realised in 2018, making it the highest revenue generated in the last three years. The document stated that this was made possible as a result of several initiatives designed by the agency to ensure a robust tax administration that is beneficial to all stakeholders. It explained that non-oil tax revenue increased to N2.149 trillion in 2016, N2.5 trillion in 2017 and N2.852 trillion in 2018. The document quoted the Executive Chairman of the agency, Babatunde Fowler saying the achievement was a reflection of the diversification of the Nigerian economy by the Federal Government.  “This does not mean that we have left behind the oil tax revenues. It grew from N1.15 trillion in 2016 to N1.52 trillion in 2017 and N2.52trillion in 2018. Non-oil tax revenue is still over in excess of the oil tax revenue. “We also do collect four per cent in terms of cost of collection but only for non-oil revenue collected. On oil revenue collection, we do not get any commission and we have been able to make sure that our services are more efficient and convenient to taxpayers. “This has brought about a considerable reduction in the cost of collection of actual taxes. “In 2016, it was 2.6 per cent, 2017, 2.49 per cent and 2018, 2.14 per cent, meaning that our actual cost of collection is heading downwards based on the efficiency and technology that we are deploying to tax collection. “Some of the ICT initiatives that we have continued to build on are the e-payment channels which make it convenient and easy to pay taxes anywhere in the world and to also download receipts of payment from any point one so desires,” he said.   Source: RipplesNigeria

On 13 January, 2016, the International Accounting Standard Board (IASB) announced the issuance of a new accounting standard: International Financial Reporting Standard (IFRS) 16, on leases, which took effect on 1 January 2019. The new standard has changed the basis of accounting for leases which was in force for more than thirty years. While IFRS 16 completely replaces the old rule under International Accounting Standard (IAS) 17, the major impact is on the recognition, measurement and disclosure requirements for lessees. The new standard eliminates the classification of leases as either operating or finance for lessees and, instead, introduces a single lessee accounting model. According to an IASB survey conducted in 2016, listed companies around the world had around US$3.3 trillion worth of leases. Based on IAS 17 requirements, over 85% of the leases are labelled as operating leases and are not recorded on the balance sheet of these companies. This amounts to about $2.8 trillion worth of leases off the balance sheet of such entities. Given the effective date of 1 January 2019 for the adoption of the new standard, most companies had about three years to evaluate the legal, commercial and financial reporting impact of the new standard on their financial positions and transactions. In this article, we have discussed the extent to which the new rule disrupts the Nigerian tax space, and the options available to companies and businesses moving forward. The Old Wine Explained In line with the Federal Inland Revenue Service (FIRS) information Circular No.2010/01 on Guidelines on the tax implication of Leases , a lease can be broadly defined as a contractual agreement between an owner (the lessor) and another party (the lessee) which conveys to the lessee the right to use the leased-asset for consideration usually periodic payments called rents. With the adoption of International Financial Reporting Standards (IFRS) in 2012, recognition of leases have been based on IAS 17 (the old rule). Under the old rule, a lease arrangement is classified as either an operating lease or a finance lease. Finance leases are arrangements that transfer risk and rewards relating to the use of an asset from the lessor to the lessee. This means that in a finance lease arrangement, the lessee is deemed the economic owner of the asset since he is able to apply the asset to generate economic benefits from continuous usage. All other types of lease arrangements are classified as operating lease. Accounting by Lessee and Lessor under the Old Rule – Finance Lease Under the old rule, lessees were required to recognize a finance lease arrangement as both an asset and a liability at an amount equal to the fair value (sale price agreed upon by a willing buyer and seller, assuming both parties enter the transaction freely and knowledgeably) of leased asset. Where this value is lower than the fair value, recognition should be based on the present value of the minimum lease payments to be made by the lessee. Finance (interest) charge is also accrued on the liability over the term of the lease. Subsequently, the annual lease payment made by the lessee is applied towards settling the liability and finance charge that has accrued in relation to the arrangement. Thus, by the end of the lease term, the lessee would have paid for the fair value of the asset plus the finance charge on the leased assets. The lessee depreciates (it may fair value or revalue alternatively) the leased assets annually and charges the annual finance (interest) cost to its income statement. Since risk and rewards are transferred in a finance lease, lessors are not allowed to recognize the leased asset in their books. Rather, they recognize a receivable (from the lessee) equal to the fair value of the leased asset. Additionally, lessors recognize annual finance income receivable from lessee over the term of the lease. Accounting by Lessee and Lessor under the Old Rule – Operating Lease Under operating lease, lessors retain the risk and rewards. Hence, lessees are not allowed to recognize any asset. Lessees recognize operating lease payment as periodic expense on a straight-line basis over the term of the lease. Lessors however continue to carry the asset in its books, depreciating them on annual basis. Additionally, they recognize the operating lease rental receivable from lessee over the term of the lease from lessees as periodic income in the income statements. Tax Implications of the Old Rule The Companies Income Tax Act provides for the tax treatments of leases. The tax treatments are also explained in the Federal Inland Revenue Service (FIRS) Circular on the Tax Implication of the Adoption of the IFRS. It should be noted that the prescribed tax treatment aligns with the old rule under IAS 17. Under a finance lease arrangement, lessees have the responsibility to deduct withholding tax on the annual finance/interest charge while they claim capital allowance on the leased asset. The interest charge constitutes a deductible expense when computing their income tax liability. For lessors, the finance income constitutes a taxable income and they are not allowed to claim capital allowance on the leased assets. For operating lease arrangement, the lessee deducts withholding tax on the annual operating lease rental while the lessor accounts for the VAT on the amount. The lease rental constitute deductible expense and taxable income in the books of the lessee and lessor respectively. Additionally, the lessor continues to claim capital allowance on the asset. What has Changed? The new rule retains the two categories of leases, operating and finance, for the lessor, as well as the recognition under the old rule. However, it prescribes a single accounting treatment for lessees. The new rule requires lessees to recognize a “right-of-use asset” and a lease liability at the inception of the lease. The lease liability is measured at the present value of outstanding lease payment. The recognized liability accrues finance (interest) charges over the term of the lease and any payment made by the lessee is used to settle the original