March 31, 2020
The world, as it is now, is recognized as a “global village” connected by international trade, telecommunications, internet, and migration of individuals across different jurisdictions. The phrase “Global Village” was introduced by Marshall McLuhan in 1964 to describe how standard of living will improve in future due to advancement in technology. Globalization, though, has its pros and cons especially as it relates to immigration and migration of nationals across different jurisdictions. An obvious con is reflected in the prevailing global pandemic, COVID-19 (the Corona virus). Economies worldwide are struggling under the devastating effects of this pandemic. Central banks in various countries have pledged billions of dollars to support their economies, businesses and workers that have lost their jobs. Many countries have also enacted travel restrictions as a measure to combat the spread of the COVID-19 pandemic.
How does this affect you as a taxpayer? How does this affect tax resident individuals with statutory obligation to file Personal Income Tax (PIT) in Nigeria? In this article, we examine the impact of the COVID-19 pandemic on tax compliance for individuals.
Residency is a key factor in taxation. There are no universal rules for determining the tax residence of a person. Different tax jurisdictions have different definitional rules of residence as contained in their respective income tax legislation and judicial pronouncements. Foreigners, who are upwardly mobile, may have tax residence determined by laws, which vary from jurisdiction to jurisdiction. Some countries determine individual residence based on physical presence, while others use a combination of factors such as location of permanent home, economic interests and family.
In the United States of America (US), a citizen is regarded as resident in the US irrespective of the length of stay abroad. This, as we will see, may potentially create a problem of dual tax residence.
In Nigeria, individuals are expected to pay their PIT to the state in which they are deemed resident and to file tax returns annually.In Nigeria and some other jurisdictions across the globe, one of the criteria for determining of tax residency of non-nationals is physical presence. A person is deemed tax resident in Nigeria, if he/she exercises duties of employment in Nigeria. The residence risk for expatriates under foreign employment can be triggered where the duties of employment are carried out in Nigeria for a period of 183 days or more (including temporary period of leave or absence) in a 12-month calendar year. There is also the case of Nigerians with tax filing and payment obligations in the country and who, because of their economic status, are highly internationally mobile.