June 20, 2020
On 2nd June, 2020, the Federal Inland Revenue Service (“FIRS” or “the Service”) issued three Public Notices directing taxpayers on certain issues with respect to their tax compliance as well as the extension of the timeline of certain COVID-19 Palliatives. We have provided the summary of the Public Notices below.
Extension of Deadline on Penalty and Interest Waiver
The FIRS via a Public Notice notified taxpayers that it will waive all interests and penalties in respect of outstanding tax debts, provided that affected taxpayers pay their outstanding tax debts in full, on or before 30th June, 2020. The FIRS had initially announced that taxpayers had to pay their outstanding tax liabilities before 31st May, 2020 to enjoy the waiver of penalty and interest. However, this timeline has now been extended by one month (i.e. till 30th June, 2020).
The Notice further encourages taxpayers to take advantage of this extension, especially those with outstanding liabilities arising from:
In addition, tax debtors under VAIDS are at risk of getting their earlier approved incentives withdrawn if they do not defray their outstanding tax liabilities by the 30th June, 2020 deadline.
Resumption of Field Audits, Investigation and Monitoring Exercises
The FIRS also issued a Public Notice informing taxpayers of its intention to resume tax audits, tax investigations and monitoring exercises which were earlier suspended to cushion the effects of the COVID- 19 Pandemic. The Notice stated that these activities would resume in two phases:
Language of Record keeping by Taxpayers
In another Public Notice, the FIRS has directed every company doing business in Nigeria to keep records and to report all its transactions for tax purposes in English Language.
The Public Notice was issued pursuant to FIRS’ powers under Section 63 (1) of the Companies Income Tax Act which empowers the FIRS to require a company to keep its records in a specified form and language.
The Notice further explains that compliance with the FIRS’ directive will enable the service to perform its functions effectively without a language barrier and will aid taxpayers to be transparent in their record keeping and reporting. The Notice also states that this directive takes effect immediately and failure to comply will attract sanctions in line with the extant laws.
By issuing these Notices, the FIRS intends to ensure tax compliance to the full extent of the law. This is particularly highlighted by the FIRS’ intention to resume field audits by 30th June, 2020.
The extension of the waiver on interests and penalties is therefore an opportunity for taxpayers to comply with their obligations within the available window and besides reducing the tax burden of taxpayers occasioned by penalties and interests, it will encourage defaulting taxpayers to come forward to fulfil their tax obligations. Tax defaulters under VAIDS also need to fulfill all outstanding obligations in order to enjoy the waiver of interest and penalties granted by the FIRS under VAIDS. The FIRS did not however, directly address VAIDS debtors that have previously agreed a payment plan beyond 30th June 2020 with the FIRS. In this regard, we expect that the waiver of interests and penalties should still apply to VAIDS debtors in this category even where they do not defray their outstanding tax liabilities before the stipulated deadline of 30th June, 2020. In view of the foregoing, affected taxpayers are advised to engage with their tax advisors to take advantage of the concessions and ensure general compliance with the provisions of the law in order to avoid losing the concessions previously granted them and falling in default of their obligations.