Tax & Business Matters - Nigeria

LIRS extends filing deadline for employers to 8 Feb. 2019

The LIRS has extended the deadline for employers to file their annual returns from 31 Jan to 8 Feb 2019. This is to enable companies who have been unable to file online to do so without incurring late returns penalties.

Court rules that FIRS cannot assess companies to income tax based on value of properties

Facts of the Case

In Theodak Nigeria Limited v FIRS, FIRS assessed the company, engaged in the letting of office premises, to tax based on a percentage of the value of its property relying on section 30(1)(a) of CITA. The company challenged the assessment and asked the Federal High Court (FHC) to declare the assessment invalid and also restrain FIRS and/or its agents from taking steps to enforce the assessment.

Our viewpoint

In our opinion, CITA does not grant the FIRS powers to deem a company’s turnover under any circumstance. Section 30 only grants the FIRS powers to deem the assessable profits of a company based on the turnover as contained in the company’s returns. Where a company fails to file returns, the relevant section is s65(3) of CITA which empowers the FIRS to deem a company’s total (taxable) profit using Best of Judgement. Again this section does not empower FIRS to deem a company’s turnover.

With respect to objection under section 69, even though the FHC held that it is not mandatory for a taxpayer to object to an assessment, our view is that a taxpayer who decides not to object to FIRS must appeal to the Tribunal/Court within 30 days of receipt. The word ‘may’ should be read to give the taxpayer the option of either objecting or appealing within 30 days. This is consistent with Paragraph 13 of the 5^th Schedule to the FIRS (Establishment) Act (which overrides CITA). Failure to object or appeal within 30 days would make the assessment final and conclusive.

Read our alert for further analysis and download a copy of the judgement for your reference.

Download PwC Tax Alert_FHC Decision on Turnover Assessment_Jan2019

Download CTC OF JUGDMENT_Deemed turnover assessment_29Nov2018

The Financial Reporting Council of Nigeria has published a new Code of Corporate Governance

Introduction

The Federal Government of Nigeria has unveiled the Nigerian Code of Corporate Governance (“NCCG” or the “Code”) drafted by the Financial Reporting Council of Nigeria (“FRC”).

Background to the new Code

Sometime in 2016, the FRC released three draft Codes of Corporate Governance for Private Companies, Public Companies and Not-for-Profit Entities. The Codes were suspended as a result of the controversy generated after the release. In exercising its functions based on Sections 11c and 51c of the FRC Act, the FRC drafted a new Code that consolidates the Codes for private and public companies while the Code for Not-for-Profit entities remain suspended.

Objectives of the Code

The Code seeks to institutionalise and encourage better corporate governance practices in Nigerian Companies. In particular, the Code is principle based and requires the “apply and explain” approach. Companies are to adopt the practices in the Code and explain the reasons for adopting them in line with their activities. The FRC will monitor the implementation of the Code through sectoral regulators, who will impose appropriate sanctions for infractions, based on the sectoral laws and regulations.

Structure of the Code

The Code is in 7 Parts and contains 28 Principles. It covers the Board of directors, Audit, Relationship with shareholders, Business conduct with ethics’, Sustainability, Transparency and Definitions.

Read our alert for more and download a copy of the Code for your reference.

Download PwC Regulatory Alert_Code of Corporate Governance_January 2019

Download Nigerian Code of Corporate Governance 2018

An Order to enable the private sector fund road construction has been introduced

Nigeria’s President, Muhammadu Buhari has signed an Executive Order 007 to enable private sector companies fund the construction of roads and be repaid via tax credits to be utilised against their future tax obligations.

The Order is known as the “Road Infrastructure Development and Refurbishment Investment Tax Credit Scheme”.

Watch this space for further details shortly. 

Stay ahead, register for PwC's 2019 Tax Academy

"Leadership and learning are indispensable to each other." - John F. Kennedy

Registration is open for PwC’s 2019 Tax Academy sessions. See link for detailed curriculum which includes topics, synopsis, learning objectives, contents, dates and venue information.

You can register here

Participants who register before training date are entitled to early bird discounts of 20% while those who register for 12 sessions and pay in full not later than 31 January 2019 will receive gifts.

Our training sessions are accredited for the purpose of fulfilling mandatory professional education requirements for ICAN, CITN and ACCA.

Tax reflections and predictions: A review of the tax environment in 2018 and expectations for 2019

One of the key developments in 2018 was the FIRS writing to banks appointing them as collection agents of taxpayers considered to be delinquent in their tax payments. The FIRS directed the relevant banks to freeze the accounts until all outstanding taxes have been paid or a payment plan agreed.

With regards to outlook for 2019, being an election year in Nigeria, it is reasonable to expect very little or no progress in terms of tax policy implementation and overall fiscal reform while tax authorities at all levels will continue with their aggressive measures to enforce tax compliance leading to more disputes that will keep the tribunal/courts busy.

Globally, the impact of the tariff trade war initiated by the Trump administration will be felt worldwide as major economies suffer slower economic growth while the race to average corporate income tax rates will intensify following the recent tax reforms in the US. Efforts by the OECD to fight tax avoidance will continue but taxation of the digital economy will still be a hard knot to crack without any major global consensus and more countries taking unilateral measures.

Read my article below for more 2019 predictions and in case you missed any major tax events in the past year.

Tax reflections and predictions

LIRS appoints employers to deduct and remit capital gains tax on compensation for loss of employment

The LIRS has issued a Public Notice mandating employers to account for and remit CGT on termination benefits and any other capital sum paid to disengaging employees.

Filing requirements

The collecting agents are required to file, alongside their respective annual returns, a statement showing all recipients of capital sums paid by the collecting agent in the format provided by the LIRS. Nil statements are to be filed where applicable.

Effective date

The appointment of collecting agents for CGT purposes as contained in the Notice is effective from 1 January 2019.

Our comments

Although the LIRS by this Notice is merely enforcing the law, the imposition of CGT on compensation for loss of employment may be regressive in the absence of a threshold. This is because the 10% CGT rate will be higher than the effective PIT rate for very low income earners. The LIRS should therefore consider a modification of the notice as stipulated under S.43(1) of the CGT Act to address this issue.

See our alert below for further details:

Download PwC Tax Alert_LIRS Notice appointing agents for CGT_Jan2019