On November 8, 2019, the firm held its quarterly interactive session tagged “Tax Challenges: An Overview of Year 2019 Recent Developments and Looking Beyond” where taxpayers, consultants, officials of the Federal Inland Revenue Service (FIRS) and those of Lagos State Internal Revenue Service (LIRS) were present.
The session was an avenue where taxpayers interacted with tax officials and tax experts on issues bordering on tax operations in Nigeria. During the session, different tax challenges were highlighted and solutions were suggested for the problems identified. Taxpayers were also privileged to have an idea of what future tax year’s expectations would be especially for year 2020.
At the tax interactive session which lasted for over 3 hours, presentations were made on the following topical issues:
- Challenges of FIRS Tax Audit & Proven Solutions by Dr Titilayo E. Fowokan, (FCTI, FCA, CFE)-Council Member CITN
Below is the extract of the presentation.
Dr Fowokan suggested that an ideal tax audit process should involve the following parties: Taxpayers; Tax Authorities; Consultants to Taxpayer and Revenue Consultants (Tax Audit Monitoring Agent, etc. as the case may be).
She also maintained that some of the factors accountable for protracted tax audit exercise include: Inadequate knowledge of taxpayers operations & tax legislations by tax audit team; open-ended tax audit checklist; repetitive requests after field audit exercise; substantive approach to tax audit, taxpayers’ readiness for audit in terms of manpower availability and documents accessibility.
Some of the challenges peculiar to tax audit exercise (Federal or State) in Nigeria as suggested in the presentation include: overwhelming documentary requests by the tax authorities/consultants, repetitive request, human resources constraint, record management issue with the tax authorities, time constraint, poor coordination of tax audit team and the timeliness of the audit.
- Inter-Company Transactions: FIRS Expectations and the Role of Taxpayers by Sunday Okeowo, Deputy Director, International Tax Department, FIRS.
Below is the extract of the presentation
Mr. Okeowo considered inter-company transactions as those occurring between or among the following parties: related persons; associated persons; connected persons and persons who have the ability to control.
From the presentation, taxpayers’ obligation were identified to include: compliance with Arm’s Length Principle (ALP); obligations to declare & disclose transactions; Transfer Pricing (TP) documentation; other relevant documentation & information to be maintained by taxpayers (Country by Country Notification and Reports; 3rd parties supporting documentation and documents retention policy).
The administrative penalties associated with non-compliance with transfer pricing obligations were also discussed.
In his conclusion, Mr. Okeowo summarized FIRS’ expectation from taxpayers with respect to inter-company transactions to include: voluntary compliance; pricing all inter-company transactions in line with the ALP and adequate income tax adjustments for transactions that fail to comply with ALP.
- Recent Tax Developments: Overview of 2019 and Looking Beyond by Ajibola Sogunro (ACA, ACTI, ACE, MNIM), Head of Tax & Regulatory Services, SIAO Partners.
Below is the extract of the presentation
Mr. Sogunro in his presentation reminder participants on the present tax population of the country by giving the analogy that; over 70 million economically active persons with about 14 million people duly registered for tax purposes; while below 10 million people are active taxpayers, over 60 million economically active persons are outside the tax net.
He provided details of recent tax developments within the year to include: creation of non-resident persons’ tax office; VAT rate increment; creation of friendly tax environment via e-tax administration/solutions; introduction of joint tax audit; introduction of consolidated database of taxpayers’; imposition of administrative penalties (Transfer Pricing; Country by Country notification/Reporting, etc.) and additional tax obligations for taxpayers among others.
In his conclusion, he reminded taxpayers of future tax expectations from 2020 in the following areas:
- Nigeria’s Tax reforms to align and reflect global best practices.
- Application of revised VAT rate of 7.5%.
- Amendment to existing tax legislations (CITA; PITA; PPTA; VAT Act; GCTA; Stamp Duty Act; Custom & Excise Duties Act) via the proposed finance bill.
- Full implementation of Police Trust Fund Levy of 0.005% of net profit.
- Enlightening taxpayers on the need for voluntary compliance.
- Commencement of VAT on online transactions.
- Increase tax revenue drive to improve tax contribution to GDP.
- Developing strategies to expand the existing tax net.
- Introduction to threshold for VAT registration and exemption from income tax.
At the end of the interactive session, it is believed that each attendee, via the facilitators now have more understanding on the changing tax landscape in Nigeria and that there would be additional expectations for taxpayers from both the government (Federal and State) and the relevant tax authorities, hence the need to take tax compliance very serious like never before.
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