Tax Matters Nigeria

FIRS to Implement ITAS

The Federal Inland Revenue Service (FIRS) is set to introduce an Integrated Tax Administration System (ITAS) which will enable taxpayers file tax returns and pay their taxes online. This initiative is commendable but to achieve concrete results that will make any meaningful impact the design and implementation of the project must be top-notch. Suffice to say it is still early days so fingers crossed.  

FIRS ITAS Project

Transfer Pricing & Thin Capitalisation

I was a discussant at a paper presentation on transfer pricing and thin capitalisation by Mr. M. O. Gbonjubola, Deputy Director, Tax Policy & Legislation, FIRS during the recent annual tax conference of the Chartered Institute of Taxation of Nigeria (CITN).

It is apt to say that although we have just started implementing transfer pricing, one should expect thin capitalisation to follow in the nearest future.

You can download below a copy of the paper presented by the FIRS and a recent article on transfer pricing publiched by LexisNexis which I co-authored.

Download Transfer Pricing and Thin Capitalisation

Download Nigeria TP Article_LexisNexis

The new information circular on IFRS adoption

Read my article in today's BusinessDay on the above title which highlights the key tax implications of IFRS adoption including what you must know and do regarding your first IFRS-based tax returns.

IFRS tax implications article

May 2013 Tax Calendar

Welcome back from Workers' Day celebration. Uploaded below is the tax calendar for May 2013 for your use.

Download Tax Calendar_May 2013

FIRS Circular on the tax implications of IFRS adoption

The Federal Inland Revenue Service (FIRS) has just published an Information Circular on the tax implications of the adoption of International Financial Reporting Standards (IFRS). Key highlights include:

• Transition adjustments - Taxpayers are required to present a reconciliation of their IFRS transition adjustments for tax purposes
• Minimum Tax - The new net asset based on IFRS adoption shall not be adopted for minimum tax computation in the year of transition.
• Excess dividend tax – where dividend paid exceeds taxable profit excess dividend tax at 30% will apply notwithstanding that profit being distributed may have resulted from transition adjustments
• Extension of time for filing returns – First time adopters of IFRS would on application in accordance with Section 26 (5) of FIRSEA (and provisions of Self-Assessment Regulations 2012) be granted 3 months extension for filing of their first set of IFRS Financial statements and related returns to allow sufficient time to overcome initial conversion problems.
• Inventory - (e.g. returnable packaging materials) reclassified in line with IFRS as non-current asset shall continue to be treated as inventory in line with the existing tax practice.
• Decommissioning - Provision/estimate of cost of abandonment, dismantling, removing the item of PPE and site restoration shall not be allowed for capitalisation with PPE.
• Revaluation – Cost (and TWDV) is the basis of capital allowance computation, FIRS shall continue to disregard all revaluation of PPE. Any revaluation surplus shall not be taxable while deficit shall not be an allowable deduction.
• Asset valuation fees - Professional fees and valuation expenses relating to revaluation of PPE shall not be allowed for tax purposes.
• Componentisation – The breakdown of componentised PPE inclusive of the basis for determining the value of each component shall be filed with the FIRS as it shall form the basis of capital allowance claims and applicable rates.
• Interest free loan - when it relates to individual, it shall be regarded as benefit in kind and taxed under the provisions of PITA. In the case of corporate taxpayer, it shall be treated in line with Transfer Pricing Regulations. In all cases, the interest rate to be used shall be MPR plus a spread to be determined by the Finance Minister in line with Section 32(1) of FIRS Act.
• Impairment - all impairment losses shall not be allowed for tax purposes.
• Intangible assets - certain intangible assets such as software, franchise, and website cost will qualify for tax deduction based on amount amortised over the useful life.
• Discontinued Operation - Cessation rule shall apply when a taxpayer discontinues a line of business and commencement rule will apply if the line of business is bought over by another party at arm's length in line with Section 29 (9) of CITA.
• Financial Instruments - classified as Fair Value Through Profit or Loss (FVTPL) or held for trading are revenue in nature and therefore liable to CITA.
• Fair value measurement - All gains and losses that may arise from fair value measurement shall be disregarded for tax purposes.

Although one may not agree entirely with some of the positions taken by the FIRS, overall it is commendable that the FIRS is now proactively dealing with issues to provide certainty of treatment for taxpayers rather than taking a back seat and then turn round later to penalize taxpayers for non compliance.

Download Information Circular on Tax Implication of IFRS_April 2013

FIRS Circular on the critical tax issues for the operation of bank holding company structure in Nigeria

I have uploaded a copy of the above circular for your information in case the subject is of interest to you.

Download FIRS Circular_Bank Holding Structure_2013

Excess dividend tax: Will it ever go away?

Well, that is a billion dollar question begging for answer. Some bankers attempted to solve the problem for their bank holding companies but they did not go far even though they got the FIRS to issue a ruling and lately a circular on the subject.

Find out how the bankers missed the point from my article published in Businessday and in case you are not familiar with the issue this will give you some general overview. Also watch out for the article in the Guardian Newspaper on Monday 15 April.

Excess dividend article

April 2013 Tax Calendar

To everyone who believes in and celebrates Easter I say happy Easter and to all I say welcome to the month of April. As is always the case every new month comes with various tax compliance deadlines.

Download our April tax calendar to assist you in this regard.

Download Tax Calendar_April 2013

Tax Calendar - March 2013

Attached below for your use.

Download Tax Calendar_March 2013

The N5 trillion question for the FIRS

It is no longer news that the Federal Inland Revenue Service collected N5 trillion in 2012 but is there something else we should know about the revenue achievement? Find out from my article published in the Guardian Newspaper linked below:

FIRS and N5trillion