The Federal Inland Revenue Service (“FIRS”) introduced several measures to mitigate the effect of the COVID-19 Pandemic on taxpayers. (Please see our updates on the initial palliative measures on our website).
On 30th April, 2020, the FIRS issued a public notice titled “Update on the Palliative Measures to Cushion the Effects of COVID-19 on Taxpayers No 3” (the “Notice”), to introduce an additional palliative measure.
The Federal Inland Revenue Service (Establishment) Act 2007 imposes certain penalties for late payment of Companies Income Tax and they include the following:
a) a sum equal to 10% of the amount of tax payable;
b) interest at the prevailing monetary policy rate of the Central Bank of Nigeria (“MPR”) plus a spread to be determined by the Minister of Finance from the date when the tax becomes payable until it is paid (“Spread”) for Naira remittances;
c) interest at the prevailing London Interbank Offered Rate or the prevailing MPR, depending on which is higher plus a Spread for foreign currency remittances.
The Notice issued by the FIRS is to grant waiver on all interest accrued and penalties payable on outstanding tax debts arising as a result of desk review, tax audits and investigations. Taxpayers will be entitled to this benefit if the said debt is paid in full on or before 31st of May, 2020.
The following conditions must be met for the waiver to apply:
a) the outstanding tax liability must have arisen as a result of a desk review, tax audit or tax investigation by the FIRS;
b) the affected taxpayer must make full payment of the principal sum of the outstanding debt before the deadline.
It is pertinent to point out that the Notice does not indicate the period in respect of which the desk review, tax audits or tax investigation relates in order for the concession to apply. This means that taxpayers who have outstanding tax liabilities from desk reviews, tax audits or investigations from previous years of assessment (irrespective of the period covered) should be able to take advantage of this concession.
While the introduction of this palliative measure by the FIRS is commendable, the time frame within which to make this payment does not take into consideration the fact that most businesses are experiencing limited cash flow and have only just resumed limited operations in these unprecedented times. An extended period of about 3-5 months would have been more appropriate and will shine light on the true intentions of the FIRS to support businesses in these times.
Taxpayers are advised to advantage of the waiver proposed by the FIRS and make the requisite payments before the deadline. It is our hope that the FIRS will continue to introduce palliative measures to assist taxpayers in these unprecedented times.
The above is for informational purposes only and does not constitute professional advice by Blackwood & Stone LP.
For more information please contact:
Blackwood & Stone LP
+234 903 3501 613