Tax & Business Matters - Nigeria

New Judgement on Deemed Income Assessment

In a recent decision, the Tax Appeal Tribunal (TAT) says the tax authority must act reasonably in the exercise of its discretion to assess a taxpayer based on deemed income (or best of judgment assessment).  In the particular case, the TAT ruled that a deemed income assessment cannot be based on general expectation or what was imposed on another company.

The TAT also ruled that although the taxpayers being assessed are the employees, the employer can challenge the assessment to the extent that it alleges a breach of the employer’s statutory role as an agent of the tax authority.

Read our tax alert and a copy of the judgement below.

Download Tax Alert_TAT Decision on Deemed Income Assessment

Download TAT Judgement on deemed income_G4S case

President Buhari Appoints a New Head of the FIRS

We understand that the Acting Head of the Federal Inland Revenue Service (FIRS), Mr Samuel Ogungbesan has been relieved of his duties. He has been replaced with Mr Babatunde Fowler as the new Acting Executive Chairman of the FIRS. Mr Fowler until now was the Executive Chairman of the Lagos State Internal Revenue Service.

The New FIRS VAT Directive for Airlines and the Recent Public Notice

The world has gone digital in many ways but our tax system seems to be stuck in the Stone Age. Tax compliance rate is very low and one area where there is a high prevalence of evasion is VAT.

The FIRS recently implemented a platform for auto tracking and remittance of VAT known as FIRS VAT-Collect. Some of the intended users of the system are domestic airlines for instant remittance of VAT on their ticket sales.

We understand that some airlines are yet to enrol on the platform and so the FIRS issued a public notice last week threatening the airlines of significant disruption to their business and advised the public to refrain from purchasing flight tickets from the airlines.

There is no doubt that the rate of tax compliance is very low and everyone should support any and all initiatives designed to improve compliance and plug leakages. However, such initiatives must be in accordance with the law and must be implemented in line with due process. There is no law which compels a taxpayer to enrol into any digital platform neither is there a provision that empowers the FIRS to disrupt a taxpayer’s business as sanction for non-compliance. It should be noted that the law provides for up to 21 days after the month of transaction for a taxpayer to remit VAT. While instant remittance is not outside the law, compelling anyone to do so clearly is. The approach should be collaborative not apprehensive, and if some taxpayers are unwilling to cooperate, there is nothing stopping the FIRS from conducting audits with appropriate sanctions imposed for non compliance as prescribed in the existing law.

Even if it was wrong for the airlines not to enroll, it is also wrong for the FIRS to adopt such a draconian approach, two wrongs they say do not make a right.

Download FIRS Notice re VAT Compliance by Airlines

Insurance Banana Skins and Taxation

Tax has always been one of an insurer’s most significant expenses, comparable to payroll and claims. CFOs and CEOs have looked to their tax professionals to find ways to manage their tax liabilities, and as transactions and legislation become more complex and sophisticated, so do tax arrangements.

As companies focus on maximising return on equity and managing capital under new solvency regimes, the value that can be created by tax professionals is becoming increasingly recognised and highly prized.

The certainties and demands that have shaped tax management over the past 30 years are being swept aside. What tax teams are required to do, how they do it, who does it and where they do it will all change as a result. The challenges of managing risk and tax costs are heightened by a raft of new tax compliance demands.

Read my quote on pg 22 of today's BusinessDay and the full report by PwC titled "Insurance Banana Skins" via the link below:

Insurance Banana Skins

August 2015 Tax Calendar

It's still a new month and various tax payments and filing obligations will become due from Monday 10 August. It is critical now to meet tax payment deadlines to avoid stiff penalties as tax authorities step up their efforts to enforce full compliance and generate more tax revenue.

I have uploaded our tax calendar for the month below for your use.

Download Tax Calendar_August 2015 

The current foreign exchange control regime and implications for taxation and fiscal policy

We are all affected by the actions or inactions of government especially monetary and fiscal policies. The recent rules and changes introduced by the Central Bank of Nigeria regarding foreign exchange transactions are having immediate impacts on businesses and individuals but also there will be medium and long term impacts including implications for tax and fiscal policy.

Read my article in today's BusinessDay Newspaper for my perspective on the issue.

Download Exchange control regime and tax_Aug 2015

Tax Tribunal Says Educational Institutions Are Not Liable to Income Tax

In a recent judgement, the Tax Appeal Tribunal (TAT) has ruled in favour of a private educational institution that it is not liable to income tax on its profit. FIRS had demanded tax from the institution on the basis that it is private and charges exhorbitant fees which makes it to be outside the reach of the general public.

The TAT however ruled that the institution is open and available to any member of the public and therefore qualifies for the exemption provided in the tax laws. It further states that this status is not affected by the level of fees charged. The ruling however suggests that to be of a public character, the profits must be used for educational purpose and not distributed to owners of the business. It will be interesting to see what happens where this is not the case.

This has been a contentious issue for a long time and it is unlikely that this ruling will settle the case permanently as a number of salient points regarding the subject are yet to be addressed.

I have uploaded a certified copy of the ruling for your reference.

Download TAT ruling on taxation of educational institutions