Nigeria’s 2021 budget: What you need to know

Following the recent release of the 2021 budget by the President of the Federal Republic of Nigeria, there have been concerns over Nigeria’s debt stock as the nation plans to fund the 2021 budget deficit with N4.28 trillion new borrowings, a situation that has attracted huge backlash from the citizens. The proposed new borrowings represent about a third of the proposed budget. We explain further details on the proposed budget below while comparing it to the 2020 budget.

The proposed 2021 budget has a total expenditure of N13.08trillion while the 2020 budget had N10.81trillion, indicating a total change of 21% while the revenue in the proposed 2021 budget has been put at N7.88trillion while that of the 2020 budget was N5.84trillion with a change of about 35%. Thus, an aggregate sum of N3.85 trillion is expected to be available for capital projects in 2021.

Revenue generation remains government’s main challenge. In this regard, key revenue management measures introduced include deregulation of the price of petroleum products; ongoing verification exercise with IPPIS; and implementation of service-based electricity tariffs. We strongly believe that the exploitation of other sectors of the economy is very important in getting ahead of the revenue generation. We need to explore other sectors such as Agriculture, Technology etc. This will greatly improve in the revenue generation of the country instead of placing maximum focus on only a few sectors.

The 2021 Budget, which is themed the “Budget of Economic Recovery and Resilience”, is determined to deliver on the Government’s Economic Sustainability Plan goals, accelerate the pace of Nigeria’s economic recovery, promote economic diversification, enhance competitiveness and ensure social inclusion.

The quick passage of the Petroleum Industry Bill into law is expected to boost confidence and attract further investments into the oil and gas sector and increase the revenues. The Government is also committed to implementing programmes to lift 100 million Nigerians out of poverty over the next 10 years. Social safety nets will be implemented to cushion the effect of the most vulnerable of our citizens as well as business owners.

What is your 2021 Tax Strategy – HOW TO STAY AHEAD OF THE PAYE FILING RETURNS PROCESS

Tax compliance: PAYE

In Nigeria today about 75% of potential taxpayers are not in the tax net, and about 65% of registered taxpayers are not fully compliant. This is a worrisome reality that needs to be critically addressed as the average level of tax compliance in Nigeria is put at about 10% based on our research findings.

A taxpayer must ensure that his/her taxes are paid and are also duly accounted for from time to time. This means taxes are paid as and when due and that relevant returns are submitted to the tax authorities in prescribed forms and formats. Going by the news emanating from many State Boards of Internal Revenue, the level of compliance with the requirements for filing of Personal Income Tax returns as prescribed by the Personal Income Tax Act (PITA) remains low across the country.

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Constant increase in the inflation rate – Nigeria’s CPI August 2020 Report

The latest CPI and Inflation Report released by the National Bureau of Statistics has revealed that inflation increased by 13.22% (Year-on-Year) in August 2020. This is 0.40% points higher than the rate recorded in July 2020 (12.82%).

It’s is not so surprising that the consumer price index (CPI) in Nigeria rose to its highest in over 3 years in the previous month (August 2020). The increase in the price of food is said to be the major reason in this hike.

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TAT’s Decisions on VAT on Real Property Leases – Some Clarifications

As you are aware, on Tuesday, 10th September 2020, the Tax Appeal Tribunal sitting in Lagos State, Nigeria (TAT) delivered Judgement in  Appeal No. TAT/LZ/VAT/029/2019: Ess-Ay Holdings Limited v. Federal Inland Revenue Service (FIRS) (available at: https://taxaide.com.ng/wp-content/uploads/2020/09/Judgement-Ess-ay-Holdings-Ltd-v.-FIRS.pdf)

Issues to be determined:

  1. Whether rental income from real property is subject to Value Added Tax (VAT) under Nigeria’s VAT Act, 1993 (as last amended in 2007)?;
  2. Whether the provisions of the FIRS Information Circular No. 9701 dated 1st January 1997 which exempted only rents from residential properties (and not commercial properties) is valid?
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THE TAXAIDER NEWSLETTER VOL 2, ISSUE 8 (AUGUST 2020)

First Thoughts: Post-Lockdown Musings

I have often heard some people say they usually get their inspiration to write from rather uncomfortable situations and experiences. I say, ‘well done to them’. I guess I need to learn how they manage to do this. So, I’ve been in traffic for the last three hours and guys, I can’t seem to get any inspiration from this experience and putting down my ‘First Thoughts’ for today’s Newsletter has been quite a challenge. I have been looking from my laptop to the window repeatedly as we move at snail speed. Once or twice, I have been tempted to step out of the car to stretch my legs but hey, this is Lagos, and this is the Third Mainland Bridge! Anything can happen! Hopefully, I would get home before I am done with this piece.

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Approaching the Common Reporting Standard (CRS) Deadline: Important Information Your Financial Institution Should Know + Do

  1.  Nigeria’s Income Tax (Common Reporting Standard) Regulations 2019 (the Regulations) became effective on July 1, 2019. Nigeria’s Federal Inland Revenue Service (FIRS) is the administering agency.
  2. The Regulations places an obligation on all financial institutions in Nigeria to provide a report to the FIRS on all accounts (Reportable Accounts) maintained by their customers (Reportable Persons) that are not tax-resident in Nigeria or the United States of America (USA).
  3. Your financial institution does not need to provide a report to the FIRS on the accounts (non-Reportable Accounts) maintained by your Nigeria or USA-resident customers (non-Reportable Persons).
  4. Accordingly, and for the purpose of the Regulations, Nigeria and USA are non-Reportable Jurisdictions. All other countries are Reportable Jurisdictions.
  5. A person who has dual tax residency in a Reportable Jurisdiction and a non-Reportable Jurisdiction, is a Reportable Person and accordingly his/her account in your financial institution is a Reportable Account. For example, the accounts of a customer who is tax-resident in both Nigeria and Canada, is a Reportable Account.
  6. Your financial institution has an obligation to know the tax residence of all persons who maintain an account with it. Accordingly, you need to put in place a due diligence process that elicits this information from all your customers.
  7. Your financial institution must maintain a register, schedule or enterprise resource planning tool (ERP) (altogether, Report Register) that identifies all your Reportable Persons and Reportable Accounts.
  8. Your Report Register must contain information such as the following on all Reportable Persons and Reportable Accounts: Name, Address, Reportable Jurisdiction, Date and Place of Birth, Reportable Account Number, Tax Identification Number, Income (including interest, dividends and other income) earned by Reportable Person, and Reportable Account Balance as at end of the relevant period.
  9. Your financial institution must prepare and submit an annual Reportable Accounts Information (Information Returns) not later than Wednesday,  September 30, 2020 to the FIRS. Accordingly, Information Returns on all Reportable Persons and Reportable Accounts maintained in your financial institution in 2019 is due to be submitted to FIRS not later than Wednesday, September 30, 2020.

    Please note: The Reportable Accounts Information (Information Returns) should be submitted not later than May 31st of every year to the FIRS. Due to the COVID-19 Pandemic the deadline was extended. Please read more HERE.
  10. Your financial institution is still required to submit Information Returns even though you have no Reportable Accounts; in which case, a nil Information Returns will be filed with FIRS.
  11. FIRS may share your financial institution’s Information Returns with Nigeria’s counterpart countries further to Nigeria’s obligation under the Multilateral Agreement on the Automatic Exchange of Financial Account Information.
  12. Similar to your accounting records, your Information Returns are required to be kept for minimum of 6 years thereafter.
  13. FIRS may, by a notice in writing, additionally require your financial institution to furnish it, within a minimum of 14days, with any document or information on compliance with the Regulations.
  14. Failure to comply with any of these obligations will expose your financial institution to a maximum flat fine of ₦10million plus ₦1million for every month of breach. For emphasis, your obligations include: keeping your Report Register; filing your Information Returns correctly and accurately; and being ready at any time to supply FIRS with any document or information lawfully requested from your financial institution.
  15. You can employ the services of a service provider like Taxaide to assist with your due diligence and reporting obligation under the Regulations. Taxaide can also assist with the automation of your CRS compliance process including deploying a CRS-focused ERP.

For further enquiries on the subject, please contact Taxaide’s International Tax Desk at: itd@taxaide.com.ng or business@taxaide.com.ng;  +234 700 TAXAIDE; +234 1 631 0971-2; +234 810 701 7274.

A Series on Tax Relief – Part 4

Welcome to the fourth part of this series.

The gift that keeps giving comes in the form of Tax reliefs and that is why we keep coming back with this series on Tax reliefs. 

We have been reviewing the tax reliefs made available by the Federal and State Governments to taxpayers to cushion the effects of the COVID-19 pandemic.

So far, we have reviewed the tax reliefs made available in the following states: Lagos, Oyo, Osun, Delta, Bayelsa, Kebbi, Gombe, Jigawa, Bauchi, Akwa Ibom and Yobe States. You can read them HERE and HERE.

In this piece, we would be reviewing the tax reliefs made available in Ondo and Ogun States:

The Ondo State Internal Revenue Service (ODIRS) has made the following tax reliefs and palliatives for taxpayers in the State:

i) The implementation of the Hotel, Restaurant and Event Center Consumption Tax due to start on 1st June 2020 is suspended in view of the peculiarly harsh impact suffered by the Entertainment/Hospitality sector.

ii) The full implementation of the Land Use Charge rates based on property valuation is suspended. The existing amnesty rates for Residential Property will subsist as follows: High Value Zone (HVZ): N7,000.00-10,000.00, Medium Value Zone (MVZ): N3,000.00 – N5,000.00, and Base Value Zone (BVZ): N1,000.00 – N3,000.00 per annum.

iii) Penalty and Interest on arrears of Land Use Charge from year 2017 to 2019 is hereby waived for residential property. This waiver applies to those that make payment on or before 31st December 2020.

iv) The minimum tax payable under the Presumptive Tax Regime (Artisans, Market Women, etc.) in the state has been reduced by 50% for year 2020 only.

v) The deadline for the submission of Form A for employees and Annual Returns in accordance with Sections 41 (3) & 81 (1-3) of the Personal Income Tax Act (PITA) 2011 as amended, for companies operating in Ondo State is extended to 30th September 2020.

vi) The penalty hitherto being charged on late remittance of Pay As You Earn (PAYE) deductions has been waived between March and September 2020 for all sectors.

The Ogun State Internal Revenue Service issued the following tax reliefs and palliatives for taxpayers in the State:

i) Extension of deadline for filing of 2019 Income Tax Returns by self-employed individuals/informal sector by six months from 31st March to 30th September 2020.

ii) Extension of filing of 2019 Annual PAYE operators/tax agents by eight (8) months from 31st January to 30th September 2020.

iii) Complete waiver of interest and penalty for late filing of 2019 Annual PAYE returns during the approved extension period

iv) Complete waiver of interest and penalty for late remittance of monthly PAYE from 31st January to 30th September 2020.

v) Complete waiver of interest and penalty for late payment of Direct Assessment/Personal Income Tax by self-employed individuals from 1st January to 31st December 2020.

vi) Waiver of weekly tax by operators/promoters in pool and betting business from 1st April to 30th June 2020.

Taxaide®’s professional personnel are licensed tax practitioners who can assist you with your Tax compliance process.

For more information on all tax-related issues, please do not hesitate to contact us at:

Tel: +234 700 TAXAIDE (070 829 2433), +234 1 631 0971
WhatsApp: +234 810 701 7274
Email: business@taxaide.com.ng
Website: www.taxaide.com.ng

A Series of Tax Relief Part 2

Welcome to the second part of this series.

Last week, we looked at some of the tax reliefs that have made available by the federal government to taxpayers to cushion the effects of the COVID-19 pandemic. However, various state governments have also made some tax reliefs available to taxpayers. Some of these tax reliefs available in various states include:

The Lagos State Internal Revenue Service (LIRS) has made the following tax reliefs and palliatives for taxpayers in the State:

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A Series on Tax Reliefs Part 1

A few months back, I heard the story of a young man who was in a rather unfortunate situation. I could only sympathize with his predicament. Before the COVID-19 pandemic disrupted economic and business activities in the country, this young man had a stable job but had undergone an interview with a prospective new employer in the hope of securing a better job. Based on his performance at the interview, he had been given assurances that he would get the job. However, he was yet to receive an employment letter. This young man went ahead to quit his job at the time and was waiting for the call from his “new employers”. Fast-forward to a few months later; this young man was told that the new company could not offer him the job as the COVID-19 pandemic had seriously affected their operations and ability to recruit new personnel.

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