Tax & Business Matters - Nigeria

Transfer Pricing Compliance Deadline: How Ready Are You?

You should have your transfer pricing (TP) policy and documentation in place by now or in the process of doing so. For the financial year ended 2013, tax returns must be filed within 5 or 6 months for upstream petroleum or other companies respectively. Although TP documentation is not to be submitted with the tax returns, TP declaration and disclosure forms should.

See our FAQ below for more on what you need to know and do regarding your TP compliance obligations.

Download TP FAQ_2014  

CEOs See Need for Urgent Tax Reform

We have just launched the result of a new survey in a paper, ‘Tax strategy and corporate reputation: Balancing trust and growth’, which shows that about two-thirds of CEOs around the world say the international tax system is in urgent need of reform and 70% say the impact of tax on their company’s growth is among their top concerns.

The paper analyses CEO attitudes towards tax policy issues and offers companies an approach for creating coherent tax strategy. The paper finds that tax strategy and policies are best dealt with by the Board of Directors and should include consideration of such issues as impact on stakeholders, transparency, governance and controls and communications.

CEOs have a difficult balancing act ahead. The increasing tax burden is a serious concern for many, and changing public attitudes to corporate taxation cannot be ignored. A company’s policies on tax, even if perfectly legal, can present a serious risk to corporate reputation.

Key findings

• For CEOs, tax reform is the single biggest issue that needs to be addressed; 65% said that the international tax system doesn’t meet the needs of multinationals. However, just 27% feel a consensus on tax reform can be reached among the G20 countries in the near future.
• As CEOs expand their operations at home and abroad, the tax burden is seen as a major barrier to growth; 70% of CEOs cite the impact of tax and its potential to affect growth as a concern, an increase from 62% last year. 
• CEOs are extremely aware of the need to rebuild the trust between business and stakeholders. 49% said that a lack of trust in business hampers their prospects for growth, an increase from 37% last year. Many CEOs are emphasising the importance of promoting a culture of ethical behaviour in business decision-making; three-quarters agreed that it was important that their company was seen to be paying its ‘fair share’ of tax.
• Overall, 63% of CEOs worldwide say that government tax policy and the competitiveness of local tax regimes are key factors in decisions about where to operate their business.
• CEOs have little confidence that their own government or the international community will succeed in making the tax reforms that they need. Just 21% of CEOs felt that their government had been effective in creating a more internationally competitive and efficient tax system.

“The reality is that tax is a cost as well as an obligation. A well thought out tax strategy balances business cost pressures, national fiscal needs and international tax norms in a sustainable way.

PwC Survey

Nigeria Tax Summaries

Navigating the muddy landscape of the tax legal framework in Nigeria can be a daunting exercise. Attempting to make a quick reference about key provisions of the various laws and regulations is even more challenging.

To ease your burden, I am pleased to share with you our updated Tax Data Card, a summary of the key tax laws and regulations in Nigeria. Hard copies are available upon request.  

Download Tax Data Card 2014_2015

How the New Pension Reform Bill May Affect You

The Senate has passed a new Pension Reform Bill which seeks to replace the existing Pension Reform Act 2004. The Bill is yet to cross a further legislative hurdle and the Presidential assent required to become law. When this is done, several changes will be introduced such as the imposition of a 10-year jail term for persons found guilty of misappropriating pension funds, the creation of a Pension Protection Fund, inclusion of more private sector employers, increase in the minimum contribution into the Scheme by both employers and employees, and the imposition of fines and penalties on Pension Fund Administrators (PFA) for failing to meet their obligations to pension contributors and for failing to comply with the provisions of the Act.

Employers may need to restructure their staff compensation to minimize the impact of increase in staff cost while maintaining staff take home pay at current levels.

See attached for further insights.

Download PwC Pension Alert

Update on VAT Filing: A New Directive from the FIRS

The Federal Inland Revenue Service (“FIRS”) has issued letters to taxpayers to start submiting schedules along with their VAT returns showing the VAT attributable to their different branches. We understand that the directive from the FIRS is meant to elicit relevant information regarding the derivation of VAT revenue from the different states and local government councils in Nigeria for revenue sharing purposes.

Read our Tax Alert attached below to see how this may affect you.

Download VAT on branches - Tax alert

Lagos State Loses VAT Case Against the Federal Government

We understand that the Lagos State government today lost its case filed at the Supreme Court challenging the powers of the federal government (FG) to collect Value Added Tax on goods and services supplied in the state. The Lagos State government had sued the FG seeking for a ruling to repeal the VAT Act on the basis that it was outside the legislative remit of the FG to collect the tax.  The court however ruled in favour of the preliminary objection of the Attorney General of the Federation on behalf of the FG that the Supreme Court does not have original jurisdiction in the matter as it was a dispute between an agency of the FG and Lagos State and not a dispute between the FG and the Lagos State government. This is on the basis that VAT is collected by the Federal Inland Revenue Service which is an agency of the FG.

Lagos State has promised to explore other avenues to resolve the dispute.

Tax Agenda for the National Conference

We have ignored taxation for too long as a nation. We must now seize the moment to write the tax history of our future.

Ironically we tax individuals and businesses that are struggling to survive, but subsidize those that are thriving while we overregulate those that should have kept us moving forward until they became comatose.

Read my article on the subject in today's editions of BusinessDay pg 15 and Guardian Newspaper pg 26.

Tax Agenda  

Tax Calendar_April 2014

Attached below is our tax calendar for April 2014 for your use. Ensure to comply with the various deadlines to avoid imposition of penalty and interest.

Download Tax Calendar_April 2014