Tax & Business Matters - Nigeria

Nigeria's 2016 Budget on a Page

Get the highlights of the recently signed Budget (2016 Appropriation Act) of the Federal Government of Nigeria and the Medium Term Expenditure Framework (MTEF).

Tax highlights:

• No proposal or indications to increase tax rates or impose new taxes in 2016
• The budget speech was silent on the proposals by the National Assembly to introduce a National Security Tax and Communication Service Tax as well as the proposed increase in Tertiary Education Tax (TET) by the TET Fund
• Government is however focused on measures to increase the tax base and overall compliance rate in the country
• Luxury tax is expected to generate NGN15billion but no disclosure of measures to implement
• Smaller businesses are to enjoy reduced tax rate but details yet to be provided

Download Nigeria's 2016 Budget on a Page

Download 2016 Appropriation Act

Economy Alert: Nigeria 2016 Q1 GDP shows that the economy contracts to -0.36%y/y

Growth in the non-oil sector (89.7% of GDP) has been the main driver of Nigeria’s economic growth (5-year average: 6.2%), and employment. Whilst we expect growth in Q2 to be as tepid as Q1, we are optimistic about the second half of 2016.

Read more here from our Economy Alert.

Download PwC Economy Alert_Nigeria 2016 Q1 GDP_May

When does doing business in another country cross the tax line?

“At The Palms now. They have started paying to park. Everybody inside here is walking ‘fast fast’.” - Chima Emerueh

Chima’s observation is a classic illustration of our tendency as humans to change our behaviour to avoid additional costs (in this case the introduction of a parking fee of only N200 at a shopping mall in Lagos).

"I’ve looked at the recommendations from Action 7 and my guess is that the biggest impact in Nigeria will not come as a result of any changes in the law. The biggest impact will come from elsewhere. Stick around and I will tell you what I mean." - Seun Adu, TP Leader, PwC Nigeria

This article was published in BusinessDay on Monday 16 May 2016. It is a review of the OECD Base Erosion and Profits Shifting (BEPS) Action 7 on Permanent Establishments. See attached for details or follow the link below.

Download PwC Tax Bites_BEPS Action 7 on PE 

When does doing business in other countries cross the tax line?

Also read earlier article on digital economy also by Seun Adu Taxation of digital economy, how will things change?

FIRS now seals off companies that are clearly in tax default

First it was posting of non-compliance stickers on the premises of defaulting companies (see our earlier alert here http://goo.gl/kqzVYG). Now, the FIRS has begun to seal off companies that have failed to comply with their tax obligations.

We spoke to one of the Coordinating Directors of the FIRS who explained that the action is only applied to companies that are clearly in default such as:

1. Failure to file VAT returns over an extended period of time. Some of the affected companies are said to have failed to file monthly VAT returns for up to 3 years
2. Failure to pay undisputed tax liability whether arising from self assessment or a tax audit

In the event of a tax audit resulting in disputed liabilities, this action will not be taken where the company follows the procedures and timelines for assessments and objections as contained in the law.

Although there is no specific provision of the law that supports the sealing off of a company's premises in this manner, it is clear that these measures are being implemented to improve the low level of tax compliance in Nigeria in order to shore up government's revenues that have fallen by over 40% since 2014 due to sharp decline in crude oil prices.

Other than FIRS, some states such as Lagos have been doing the same thing for some time and have now intensified their efforts.

We recommend that you pay particular attention to your tax obligations both for FIRS and states taxes to avoid the unpleasant experience.

Below are two media reports for further details.

http://goo.gl/D327nm

https://goo.gl/Tfovz3

The 2016 Budget has been signed into law

President Buhari has today signed the 2016 Appropriation Bill into law following the resolution of areas of disagreement between the Legislature and the Executive. The President promised to commence implementation immediately and to ensure that subsequent budgets are presented early enough to ensure passage before the beginning of the fiscal year. 

The Minister for Budget and Planning however stated that full implementation of the Budget is not likely in view of the long delay in passing it into law. 

My view is that efforts should be made to fully implement the capital expenditure of N1.8 trillion relating to productive projects such as electricity, roads etc. This is critical to reflate the economy and generate employment. 

Watch this space for an indepth analysis of the approved budget in the coming days.