Tax & Business Matters - Nigeria

Recent changes to the Industrial Training Fund Act

The Industrial Training Fund (Amendment) Act 2011 was signed by the president on 3 June 2011 and recently gazetted but dated 22 June 2011. The amendment has a commencement date of 3 June 2011.

The key changes are:

• Minimum threshold for an employer to become liable under scheme has been reduced from 25 employees to a minimum of 5 or annual turnover of N50 million.
• Required contribution is 1% of payroll to be paid by the prescribed date defined in respect of year 2011 to mean a date not later than 3 months from the date of commencement of the amendment, that is, 3 September 2011; and in respect of every subsequent year, means a date not later than 1 April of the following year. “Payroll” has now been defined to mean the sum total of all basic pay allowances and other entitlements payable within and outside Nigeria to any employee in an establishment, public or private. “Employees” means all persons whether or not they are Nigerians employed in any establishment in return for salary, wages or other consideration, and whether employed full-time or part-time and includes temporary employees who work for periods of not less than thirty days (previously 3 months in a year).
• Maximum refund now 50% (previously 60%) of the amount paid by an employer subject to the training programme of the employer being in accordance with the Fund’s reimbursement schemes.
• Action for recovery of contributions under the Act may now be instituted by agents of the Fund on behalf of the Director-General. Contributions include underpayment and any interest or penalty payable for late payment.

Comments

The changes introduced appear to focus on generating more revenue for the Fund rather than ensuring that the objectives for which the Fund was established are met. The reduction of refund to 50% is discouraging, one would have expected that with growing number of employers now required to contribute, the total fund available to the ITF should increase and therefore no justification for a reduction in percentage refund. Also, making employers with 5 employees or N50 million turnover liable under the Act is putting unnecessary burden on micro businesses. The punitive section which imposes a penalty of 5% for each month or part of a month on outstanding contribution should have been amended to be moderate and in line with best practice.

The Guidelines for refund claim under the ITF are cumbersome making it difficult for most employers to derive any benefit from the scheme. The new changes effectively mean that employers will have to pay more and get less.

 For details, read - What you should know and do about the Industrial Training Fund (Amendment) Act 2011

Tax Calendar – February 2012

Welcome back from Eld-al-Malud, I hope you had a restful weekend.

Below is the tax calendar for February 2012. As promised earlier this is to help remind you of the various tax filing and payment deadlines and to serve as a quick reference when you are in doubt.

 

Sunday	Monday	Tuesday	Wednesday	Thursday	Friday	Saturday
			1	2	3	4
5	6	7	8	9	10	11
12	13	14	15	16	17	18
19	20	21	22	23	24	25
26	27	28	29

Compliance deadlines:

Date	Description
9	Pension contribution; Remit for Jan 2012 (assuming salaries paid on 31st Jan)
10	PAYE; File return and payment for Jan 2012
21	VAT; File return and payment for Jan 2012
21	WHT; File FIRS return and pay for Jan 2012
29	C.I.T; File self assessment and pay first installment for Aug 2011 year-end
29	C.I.T; Pay 2nd installment for Jan, Feb, Mar, Apr, May, June & July 2011 year-end
29	E.T; File returns and pay for August 2011 year-end
29	I.T Tax; Make payment for August 2011 year-end (if self assessed)
29	CGT; Make payments for August 2011 year-end
29	WHT; File SIRS return and pay for Jan 2012
29	NHF; File deduction and make payment for Jan 2012
29	PPT; Pay 12th installment for Dec 2011
29	PPT; File estimated tax return for 2012 year of assessment
29	NSITF; Pay employee compensation contribution for Feb 2012

Update on the Personal Income Tax (Amendment) Act 2011

We have obtained a copy of the gazetted Personal Income Tax (Amendment) Act 2011. This confirms our views on the original version of the amendment as contained in our previous analysis (see post of 6 January 2012).

Specifically the gazetted copy of the amendment has laid to rest the status of old tax free allowances (housing, transport, leave allowance etc) and the controversy as to whether these allowances could be claimed in addition to the newly introduced consolidated allowance. The section of the law containing the old allowances has been deleted and replaced with a new section thereby confirming that the old tax free allowances are no longer applicable.

Also, based on the gazetted amendment, expenses incurred by an employee in the performance of his duties, and from which it is not intended that the employee will make any profit or gain will continue to be tax free. However, some of the items such as medical or dental expenses, cost of passage etc which were specifically listed in the old law as non taxable have been removed. This implies that for any expense claim by the employee to be eligible as non taxable, it must have been incurred in the performance of employment duties.

The commencement date of the amendment is 14 June 2011, the date the amendment bill was signed into law. As a result, employers will have to recalculate their payroll taxes with effect from 14 June 2011 and re-file their returns under the new amendment. In the event that the recalculations result in overpayment, this should be set off against future PAYE tax payments while refunds should be paid to relevant employees as appropriate.

Going forward, employers need to review their payroll processes including software and packages, staff policy document, employment contracts, compensation structure etc to align with the new amendments.

We understand that the Personal Income Tax (Amendment) Act has now been gazetted. We will provide further comments as soon as we have obtained a copy.