KEEPING UP WITH THE NIGERIAN TAX SPACE
Time and tide wait for no man, neither does the Tax Administrator nor the government, especially when on a mission to meet revenue target. While the university community was all focused on examinations, a lot of events occurred in the tax space. With the aid of information obtained online, especially on the website of Anderson Tax, here is a glimpse into the highlights you missed.
PRESIDENT BUHARI ASSENTS TO DEEP OFFSHORE ACT AMENDMENT BILL
On 4 November 2019, President Muhammadu Buhari assented to the Deep Offshore and Inland Basin Production Sharing Contracts Act Amendment Bill (the Act). The assent was communicated by the President via his official twitter handle. The Act, amends the Deep Offshore and Inland Basin Production Sharing Contracts Act of 1999 by making changes to the royalty rates currently paid by firms operating in production sharing contracts (PSCs).
TAX APPEAL TRIBUNAL UPHOLDS ELECTRONIC OBJECTION TO TAX ASSESSMENT
On 17 September 2019, the Tax Appeal Tribunal (“TAT” or “the Tribunal”), sitting in Lagos, upheld a notice of objection to a tax assessment sent to the e-mail address of the Tax Controller of the Federal Inland Revenue (FIRS), Lagos Zone. According to the Tribunal, a receipt of e-mail by the Tax Controller being a very senior officer of the FIRS translates to receipt by the FIRS. This decision was reached in the case between Earth Moving International Limited (the Company) v Federal Inland Revenue Service (FIRS). The Tribunal also held that a notice of objection due for submission during a nationwide strike, was appropriately submitted as it was filed the working day following the strike.
FIRS ESTABLISHES A NON-RESIDENT PERSONS’ TAX OFFICE
The Federal Inland Revenue Service (FIRS) has issued a Public Notice notifying the general public of the establishment of a Non-Resident Persons’ Tax Office (NRPTO). The Public Notice directs all non-resident persons liable to tax in Nigeria to submit every return, correspondence or enquiry relating to all the taxes administered by the FIRS to the NRPTO effective 1 January 2020.
FEDERAL HIGH COURT UPHOLDS STATE GOVERNMENT’S POWERS TO COLLECT CONSUMPTION TAX
On 3 October 2019, the Federal High Court (“FHC” or “the Court”), sitting in Lagos, upheld the powers of the Lagos State Government to charge and collect Consumption Tax from hotels, restaurants and event centres within the state. The Court also restrained the Federal Government from collecting Value Added Tax (VAT) on goods consumed in hotels, restaurants and event centres. This decision was reached in the case between The Registered Trustees of Hotel Owners and Managers Association of Lagos (Hotel Owners) v Attorney General of Lagos State (AG Lagos).
According to the Court, Consumption Tax on hotels, restaurants and event centres is in the purview of the State Government based on the 1999 Constitution and the Taxes and Levies (Approved List for Collection) Act (Taxes and Levies Act). Thus, the provisions of the VAT Act in respect of consumption of goods and services in hotels, restaurants and event centres are inconsistent with the Constitution and the Taxes and Levies Act, and are therefore void.
PRESIDENT BUHARI PRESENTS THE 2020 BUDGET PROPOSAL TO THE NATIONAL ASSEMBLY
On 8th October, 2019, President Muhammadu Buhari (the President) presented the 2020 budget proposal at a joint session of the National Assembly. The budget was accompanied by the Finance Bill, which the President also presented to the National Assembly for consideration and passage into law. The budget seeks to achieve a 7% increase in the Federal Government revenue from the estimated revenue for the 2019 fiscal year while the Finance Bill proposes an increase in value added tax (VAT) rate from 5% to 7.5%.
NIGERIAN INVESTMENT PROMOTION COMMISSION RELEASES PIONEER STATUS INCENTIVE REPORT
The Nigerian Investment Promotion Commission (NIPC) recently released its Pioneer Status Incentive (PSI) Report (“the report”) for the second quarter of 2019. The report provides details of PSI applications received and granted and rejected within the quarter.
REPS COMMENCES INVESTIGATION ON THE NON-REMITTANCE OF NSITF LEVY
The House of Representatives (HOR) has commenced an investigation on the non-remittance of the Nigeria Social Insurance Trust Fund (NSITF) levy by companies, government parastatals and public corporations from 2010 to date. The Ad-hoc Committee of the HOR on the Investigation of the Non-Remittance of Contributions into the NSITF (the Committee), recently issued a Public Notice inviting different organizations and companies in the private and public sectors to an investigative hearing at the National Assembly Complex from 7th – 11th, October 2019.
FIRS RELEASES INCOME TAX (COMMON REPORTING STANDARD) IMPLEMENTATION AND COMPLIANCE GUIDELINES 2019
The Federal Inland Revenue Service (FIRS) has issued the Income Tax (Common Reporting Standard) Implementation and Compliance Guidelines (the “guidelines”). The guidelines were issued to supplement the Income Tax (Common Reporting Standard) Regulations, 2019 (the Regulations). It is aimed at giving effect to Nigeria’s commitment under the inclusive framework with respect to base erosion and profit shifting and exchange of information.
LAGOS INTERNAL REVENUE SERVICE INTRODUCES ENTERPRISE TAX ADMINISTRATION SYSTEM
The Lagos Internal Revenue Service (LIRS) recently introduced the Enterprise Tax Administration System (eTax) to enhance tax administration within the state. In a Public Notice (PN) signed by the LIRS Chairman, the eTax was described as a multi-channel tax and levies payment solution that enables payment of all forms of taxes via the web and mobile. The eTax platform will officially become effective on 1 October 2019.
FIRS RELEASES INCOME TAX (COMMON REPORTING STANDARD) REGULATIONS 2019
The Federal Inland Revenue Service (FIRS) recently released the Income Tax (Common Reporting Standard) Regulations (the Regulations), which is effective from 1 July 2019. The Regulations gives effect to the provisions of the Multilateral Convention on Mutual Administrative Assistance in Tax Matters (MAC), the Multilateral Competent Authority Agreement (MCAA) on Automatic Exchange of Financial Account Information and the Common Reporting Standard (CRS), alongside its commentaries, as approved by the Council of the Organisation for Economic Co-operation and Development (OECD.
The Regulations provide guidance on how Reporting Financial Institutions (RFIs) should identify Reportable Accounts (RA), how to perform due diligence on the relevant financial information to be disclosed, outline compliance obligations, mode of compliance and specify penalties for non-compliance. RFIs include depository institutions, investment entities, custodial institutions and specified insurance companies as defined by the CRS Guidelines, and such that are resident in Nigeria or with a branch in Nigeria.
FEDERAL EXECUTIVE COUNCIL APPROVES INCREASE IN VAT RATE FROM 5% TO 7.2%
On 11 September 2019, the Federal Executive Council (FEC) approved an increase in Value Added Tax (VAT) rate from 5% to 7.2%. This was communicated via a twitter update by the Federal Ministry of Finance and the Special Assistant to the President on Digital and New Media. According to the twitter update, the increased rate will not be implemented immediately as effecting the increase would involve extensive consultations. Furthermore, the VAT Act Cap V1 LFN 2004 would have to be reviewed before the increased rate would become effective.
NIGERIA POLICE TRUST FUND (ESTABLISHMENT) ACT INTRODUCES 0.005% LEVY ON THE NET PROFIT OF COMPANIES
On 24 June 2019, the Nigerian President signed the Nigeria Police Trust Fund (Establishment) Bill (“Police Trust Fund Act” or “the Act”) into law. The Act establishes the Nigeria Police Trust Fund (Trust Fund) to provide funds for, inter alia, the training and welfare of personnel of the Nigeria Police Force. The Act also states that the Trust Fund would consist of funds from a levy of 0.005% of the net profit of companies operating a business in Nigeria amongst other sources.
TAT RULES ON SIX YEARS LIMITATION PERIOD AND VALIDITY OF SOME TAXES AND LEVIES
On 20 August 2019, the Tax Appeal Tribunal (TAT or Tribunal) sitting at Enugu, held that a taxpayer may not be liable to taxes (including interest and penalties) based on assessments arising after the expiration of the six years statutory period for tax audits. In addition, the Tribunal held that the Abia State Board of Internal Revenue cannot collect taxes/levies simply because they are listed under the Taxes and Levies (Approved List for Collection) Act (Taxes and Levies Act) if there are no primary legislation providing for the imposition and assessment of the tax or levy. This decision was reached by the TAT in the case between Polaris Bank PLC (Bank) v Abia State Board of Internal Revenue (ASBIR).
Tax Update compiled by
ADULOJU, Oluwatofunmi Isaac
Director of Research, Tax Club University of Lagos.