Tax & Business Matters - Nigeria

FIRS approves payment of fx tax debts in Naira at N325/US$

By law, certain tax liabilities such as VAT and withholding taxes must be paid in the currency of transaction. This means for instance, if a fee was paid in USD then the applicable VAT and WHT must be remitted to the tax authority in USD.

We have received official communication from the FIRS dated 16 November 2017 approving the payment of outstanding foreign currency tax liabilities in Naira at the exchange rate of N325 to US$1. No rates were given for other major foreign currencies such as GBP and EURO.

Other details and conditions are stated below:

1. the concession covers tax due up to 31 December 2016; taxes payable in respect of the current year 2017 are excluded
2. payment must be made on or before 14 December 2017
3. notification should be sent to the FIRS Chairman stating amounts paid, date of payment, tax type, assessment number & date, and evidence of payment
4. this concession is one-off and payments after 14 December 2017 will revert to the applicable currencies

PENCOM issues new guidelines on voluntary pension contributions

A circular dated 16 November 2017 has been issued by the National Pension Commission (PENCOM) to all licenced Pension Fund Administrators and Custodians. Below are the highlights:

In respect of voluntary contributions (VCs) by Mandatory Contributors:

1. Withdrawals from VC account is limited to once every 2 years
2. Taxes will be deducted on any income earned if withdrawn within 5 years 
3. Total withdrawal from VC account is limited to 50% while the balance of 50% must be kept to augment contributor's retirement benefit

In respect of VC by Exempt Contributors (including foreigners)

1. Withdrawals from VC account is limited to once every 2 years
2. All the VCs may be withdrawn after 2 years but subject to tax on both the principal contribution and income earned thereon
3. Withdrawals made after 5 years from date of contribution will be fully tax exempt 

Note: Mandatory Contributors are those legally required to make compulsory pension contributions under the pension act while those who have no legal obligations to do so are Exempt Contributors.

In all cases, PFAs are to deduct tax where applicable and remit within 21 days to the relevant tax authority and report any withdrawal of N5 million or more to the EFCC.

While it is clear that PENCOM is trying to address instances of abuse by some contributors, some of the new rules are inconsistent with the Pension Reform Act and therefore can be legally challenged. A better approach is for PENCOM to engage with key stakeholders and seek an amendment to the law.

Contributors are advised to note the new rules as PFAs are likely to implement the guidelines regardless of whether they are legitimate or not. 

The Guidelines are effective from 1 December 2017.

Attached below is our tax alert and a copy of the circular for your information:

Download PwC Tax Alert_Restrictions of withdrawal of voluntary pension contributions

Download PENCOM_Voluntary Contribution Revised Guideline 2017

Nigeria's 2018 Budget of Consolidation

President Buhari today presented the 2018 Appropriation Bill to a joint session of the National Assembly. It was described as a budget of consolidation to:

• Reinforce and build on recent accomplishments
• Sustain reflationary policies
• Ensure diversified, sustainable and inclusive economy

Below are the highlights of the Budget:

EXPENDITURE	N'trillion
Capital expenditure	2.43
Recurrent	3.49
Debt service	2.01
Statutory transfer	0.46	incl N23b Capex
Sinking fund	0.22
Aggregate spending	8.61
REVENUE	N'trillion
Oil revenue	2.44
Non oil revenue	1.33
Independent sources (+others)	2.84
Deficit	2.00
Aggregate revenue + borrowing	8.61

Key Assumptions:

• Benchmark oil price $45 per barrel
• Oil production 2.3m bpd
• Exchange rate N305/US$
• Real GDP growth 3.5%
• Inflation rate 12.4%

Below is a copy of the Budget Speech by President Muhammadu Buhari and our Budget Bulletin for further details.

Download PwC 2018 Nigeria's Budget Highlight

Download 2018 Budget Speech

Download Appropriation Bill__Details

 

NIPC and FIRS have published a compendium of investment incentives in Nigeria

Below is the Compendium of Investment Incentives in Nigeria recently published by the Nigerian Investment Promotion Commission (NIPC) and the Federal Inland Revenue Service (FIRS).

Download NIPC+FIRS_Compendium of Investment Incentives in Nigeria_Nov2017

Revised Guidelines on Export Expansion Grant Scheme

The Export Expansion Grant (EEG) Scheme was introduced in 1986 through the Export (Incentives and Miscellaneous Provisions) Act (amended in 1992) to stimulate non-oil exports. The scheme is administered by the Nigerian Export Promotion Council (NEPC). The scheme was suspended in 2014 to ensure a review and redesign in order to prevent abuse and ensure that the scheme is fit for purpose.

Before the suspension of the scheme, the incentive was granted in form of a negotiable duty credit certificate (NDCC) utilisable by exporters for payment of import and excise duties. The NDCC has now been replaced with the Export Credit Certificate (ECC) which can be used to settle all federal government taxes such as VAT, WHT, companies income tax etc. It can also be used to purchase government bonds and repay government credit facilities, and debts due to the Assets Management Company of Nigeria (AMCON).

Read our alert for further insights on key changes to the EEG scheme and download a copy of the new Guidelines below.

Download PwC Tax Alert_Revised export expansion incentive guidelines_Oct2017

Download 2017 REVISED EEG GUIDELINES

 

Looking for a quick and simple guide to Nigerian tax?

... then look no further. I am happy to share the updated version of our Nigeria Tax Data Card. This pocket-size document contains a summary of salient issues in the major tax laws, statutory contributions, local content regulations and incentives.

Download a copy here and be nice to your neigbours and friends, share this with them :)  

Download PwC Tax Data Card 2017

What you should know about the most ambitious US tax reform in a generation

The United States House Ways and Means Committee has released a 429-page "Tax Cuts and Job Act of 2017" bill. The bill seeks to lower the business and individual tax rates, modernise US international tax rules and simplify the tax law with significant impact on numerous sectors of the economy.

 

Key areas that may be of interest to non-US based multinational entities include:

1. new 20% excise tax on on certain payments (including royalties and cost of good sold) from domestic corporations to related foreign corporations; 
2. net business interest expense deductions capped at 30% of a business' adjusted taxable income and subject to a global net interest test; 
3. new limitations on tax treaty benefits;
4. reduced business tax rate of 20% and altered how pass-through income is taxed; and
5. ability to immediately write off the cost of qualified property (not including structures) acquired and placed in service after September 27, 2017 and before January 1, 2023.

To read more about the bill, see PwC's Tax Insight and Inside Tax Policy.

 

Join our webcast on the US tax reform entitled Policy on the Move: Sharpen your understanding of how to plan for the most ambitious tax bill in a generation on Monday, November 6th at noon (EST). Register here!