Vi-M Professional Solutions

Author: Vi-M Professional Solutions

  • Voluntary Asset and Income Declaration Scheme (VAIDS)

    As an outcome of the National Executive Council (NEC) meeting held on 16 March, 2017, the Federal Government is set to implement what it calls, Voluntary Asset and Income Declaration Scheme (VAIDS), to mitigate the erosion of Nigeria’s tax base through undisclosed incomes. This VAIDS is also designed to discourage tax evasion among Nigerians, thereby generating more revenue for the government.

    Generally, the scheme connotes “willingly making known to a public authority, one’s ownership rights to assets and incomes earned from all sources’’. This will ensure that the claims due to taxpayers on such assets are accurately provided for and that no taxable income is excluded from the tax net.

    The Scheme is expected to become operational on 1 May, 2017, and run for up to six months. As proposed by the Government, it will embrace all federal and state taxes such as Companies Income Tax, Personal Income Tax, Petroleum Profits Tax, Capital Gains Tax, Stamp Duties, Tertiary Education Tax and Technology Tax etc.

    At the press briefing after the NEC meeting, the Federal Inland Revenue Service (FIRS) Chairman, Babatunde Fowler, noted that only 14 million Nigerians pay tax out of a possible 40 million, while only 214 individuals pay N20 million or more as tax annually. He also stated that the scheme is targeted at increasing annual tax contribution to Gross Domestic Product (GDP) to 15% by 2020 from its present level of just about 6%, whilst generating a conservative estimated revenue of USD 1 billion.

    Under the Scheme, incentives will be put in place to encourage early participation and taxpayers will be allowed up to three years to settle their liabilities. For its successful implementation, a Memorandum of Understanding will be gazetted and signed by the Federal Government with each State Government.

    Truth be told, we do not foresee a situation where the average Nigerian taxpayer would willingly want to declare all his or her ownership rights to assets and incomes earned from all sources.

    From the tax payment statistics announced by the FIRS above, one can easily infer that only about 214 Nigerians disclose total incomes of up to N100 million and above in a year, albeit it is common knowledge that very many high net worth individuals earn far more than this amount each year.

    Our hope is that the government will put effective processes and the right amount of incentives in place, in order to achieve the expected results from this scheme.

  • CBN Introduces Charges on Cash Deposits/Withdrawals

    The Central Bank of Nigeria on 21st February, 2017, through a circular to all Deposit Money Banks (DMBs) signed by the Director of Banking and Payments System Department, Mr. Dipo Fatokun, described the modalities for implementation of the cash-less policy to the remaining 30 states of the federation, and the application of charges on cash deposits and withdrawal above certain allowable limits. The Apex bank said this was in line with the decisions made during the 493rd meeting of the Bankers’ Committee on 8th February, 2017.

    The decisions taken at the meeting as released by CBN were as follows:

    Charges on deposit be re-introduced.

    Charges on deposits and withdrawals were reviewed and the new rates indicated as follows;

    For individuals:

    Amounts less than ₦500,000; no charges on deposits and withdrawals

    From ₦500,000 to ₦1,000,000; 1.5% on deposits and 2% on withdrawals.

    Above ₦1,000,000 to ₦5,000,000; 2% on deposits and 3% on withdrawals.

    Above ₦5,000,000; 3% on deposits and 7.5% on withdrawals.

    For corporate:

    Amounts less than ₦3,000,000; no charges on deposits and withdrawals.

    From ₦3,000,000 to ₦10,000,000; 2% on deposits and 5% on withdrawals.

    Above ₦10,000,000 to ₦40,000,000; 3% on deposits and 7.5% on withdrawals.

    Above ₦40,000,000; 5% on deposits and 10% on withdrawals.

    The new charges would take effect from 1<sup>st</sup> April 2017, in the existing cash-less states (Lagos, Ogun, Kano, Abia, Anambra, Rivers and the FCT).

    The policy shall be implemented with the charges taking effect on 1<sup>st</sup> May 2017 in the following states: Bauchi, Bayelsa, Delta, Enugu, Gombe, Imo, Kaduna, Ondo, Osun and Plateau.

    The policy shall be implemented with the charges taking effect on 1<sup>st</sup> August 2017 in the following states: Edo, Katsina, Jigawa, Niger, Oyo, Adamawa, Akwa-Ibom, Ebonyi, Taraba and Nasarawa.

    The policy shall be implemented with the charges taking effect on 1<sup>st</sup> October 2017 in the following states: Borno, Benue, Ekiti, Cross-River, Kebbi, Kogi, Kwara, Yobe, Sokoto and Zamfara.

    The income generated from the processing fees charged above the allowable cash transaction limits shall be shared between the CBN and the banks in the ratio of 40:60.

    Existing exemptions remain sustained for:

    Revenue generating accounts of the Federal, State and Local Governments (lodgments only)

    Embassies, Diplomatic Missions, Multilateral and Aid Donor Agencies in Nigeria are also exempted from all processing fees relating to the cash-less policy implementation.

    The CBN also urged the Banks to enlighten their customers on the cash-less policy, train their staffs on the cash-less policy so as to handle enquires and customer complaints, engage in media communication to complement CBN’s media campaign and engage key bank’s customers and other stakeholders.

    From the above actions by the Apex bank, the CBN has once more resurrected its fight towards a cash-less economy. Though it can be said that it is a way of generating revenue for the government during this period of economic recession.

  • The Federal Government Introduces A 60-Day Action Plan for Ease of Doing Business

    The Presidential Enabling Business Environment Council (PEBEC), during its sixth meeting, last week Tuesday, 21 February 2017, unveiled a 60-day national action plan for the ease of doing business in Nigeria. The council revealed that this was done with the intention of aiding businesses across the country and is also expected to improve Nigeria’s ranking in the World Bank’s Doing Business Index 2018.

    During the meeting, the Council approved a national action plan to be implemented across its three priority areas – Entry and Exit of goods; Entry and Exit of people and Government Transparency and Procurement – over the next 60 days to deliver tangible changes for SMEs in Nigeria.

    Acting President Yemi Osinbajo, urged the National Assembly, to come up with an enabling legislation that would facilitate ease of doing business in the country within the timeframe.

    Specifically, PEBEC is to work with the legislature to pass vital bills like the National Collateral Registry Bill and the Credit Bureau Services Bill to allow the SMEs access credit with ease. Also, the Government is understudying the Georgian Government to tap from its experience with a view to turning the business climate around nationwide.

    This initiative is to be implemented by the Enabling Business Environment Secretariat (EBES) which became operational in October 2016 with Dr. Jumoke Oduwole, the Senior Special Assistant to the President on Industry, Trade and Investment (OVP) as its coordinator.

    A statement issued at the end of the meeting indicated that one of the reforms to be implemented to ease the process of starting a business is the upgrade of the CAC online portal to ensure document upload capabilities that will make it possible for new businesses to be registered online from start to finish without having to visit the CAC office.

    It also disclosed that work is ongoing to streamline the number of agencies operating at the nation’s ports to only six. Council also listened to updates on the proposed Single Window Initiative at the ports which is expected to become operational by Q4 2017.

    This move by the Federal Government has been lauded by many stakeholders as a step in the right direction though some critics have argued that the duration is too short and could have been extended to 6 months to enable wider dissemination of information and a longer course of action. We keep our fingers crossed as we wait to see what follows in the coming days.

  • Nigeria Eases Visa Processing for Foreign Investors – Opens 28 Resident Permit Offices

    The Nigerian Government has eased visa processes for foreigners wishing to visit Nigeria for business and tourism purposes. The move was aimed at removing bureaucratic bottlenecks and encouraging business travelers and tourists in line with the national action plan for ease of doing business in Nigeria that was recently approved by the Presidential Enabling Business Environment Council (PEBEC).

    In a statement recently released by the Minister of Information and Culture, Alhaji Lai Mohammed, he disclosed that the Nigeria Immigration Service (NIS) reviewed requirements for Nigerian visas to make them more customer friendly, and added that details are available on the NIS website.

    Some of the changes made include:

    Opening additional 28 offices for issuance of Residence Permits in Nigeria, bringing the issuance of Combined Expatriate Residence Permit and Aliens Cards (CERPAC) closer to the doorsteps of employers of expatriates at all 36 states and FCT.

    Process review for visa on arrival (VoA), business visas, tourist visas and transit visas.

    Harmonization of multiplicity of airport arrival and departure form/cards into a single form for all agencies of government to save visitors the frustration of filling three different forms or more.

    Decentralization of immigration services to the State Commands.

    Decentralization of re-issuance of passports for reasons such as change of name or loss cases, to all State Commands and Foreign Missions, to save passport holders from additional costs and inconvenience of travelling to the Service headquarters in Abuja.

    These changes, according to him, are actions taken by the NIS to boost the ease of doing business and facilitate travelling for Nigerians and foreigners alike.

    *Business Visas are available for foreign travelers who wish to come into Nigeria for meetings, conferences, seminars, contract negotiation, marketing, sales, purchase and distribution of Nigerian goods, trade fairs, job interviews, training of Nigerians, emergency/relief work, crew members, staff of NGOs, staff of INGOs, researchers and musical concerts.

    *Tourist Visas are available to foreign travelers who wish to visit Nigeria for the purpose of tourism or to visit family and friends.

    *Visa on Arrival is a class of short visit visa issued at the port of entry, and is available to frequently-travelled High-Net-Worth Investors and intending visitors who may not be able to obtain visa at the Nigerian missions/embassies in their countries of residence due to the absence of a Nigerian mission in those countries or exigencies of urgent business travels.

  • CBN Amends its Foreign Exchange Policy

    The Central Bank of Nigeria (CBN), on Monday, 20 February 2017, in apparent response to the scarcity of foreign exchange in the country, released some amendments to the current forex policy.

    In a statement on Monday by its Acting Director of Corporate Communications, Isaac Okorafor, the CBN listed major areas it intends to make changes. The statement by Okorafor reads in full:

    New Policy Actions in the Foreign Exchange Market

    “In continuation of efforts to increase the availability of Foreign Exchange in order to ease the difficulties encountered by Nigerians in obtaining funds for Foreign Exchange transactions, the Central Bank of Nigeria (CBN) is providing direct additional funding to banks to meet the needs of Nigerians for Personal and Business Travel, Medical needs, and School fees, effective immediately.

    The CBN expects such retail transactions to be settled at a rate not exceeding 20 percent above the interbank market rate.

    Travel Allowances

    Having cleared the historic backlog of matured letters of credit at the inception of the current flexible exchange rate system, the CBN would immediately begin to provide foreign exchange to all commercial banks to meet the needs of both personal travel allowances (PTA) and business travel allowances (BTA) for onward sale to customers. All banks would receive amounts commensurate with their demand per week, which would be sold to customers who meet usual basic documentary requirements.

    School and Medical Fees

    Similarly, the CBN would meet the needs of parents, guardians and sponsors who are seeking to make payments of school and educational fees for their children and wards. Such payments must be made by commercial banks directly to the institution specified by the customer.

    The CBN would ensure that this process is as smooth as possible and that as many customers as possible get the foreign exchange they genuinely demand.

    This would also apply to customers seeking to make payments, or purchase foreign exchange, for medical bills and paid directly to hospitals.

    The supply of FX to retail end-users (PTA, BTA, School fees, medical bills, etc.) would be sustained by the CBN.

    Forward Sales Tenor

    In order to further increase the availability of foreign exchange to all end-users, the CBN has decided to significantly reduce the tenor of its forward sales from the current maximum cycle of 180 days, to no more than 60 days from the date of transaction.

    FX Sales at Major Airports

    In order to further ease the burden of travellers and ensure that transactions are settled at much more competitive exchange rates, the CBN hereby directs all banks to open FX retail outlets at major airports as soon as logistics permit.

    Increase Efficiency of FX Market

    In order to maintain confidence in the FX market, the CBN will immediately take the following steps:

    Begin implementing its articulated program to clear all the unfilled orders in the interbank FX market;

    Given our plan to meet all unfilled orders, and while provision of FX to the manufacturing sector would remain the CBN’s strong priority, we will no longer impose allocation/utilization rules on commercial banks;

    Implement an effective intervention programme to support the inter-bank market to ensure adequate liquidity necessary to deliver an efficient FX market;

    Advise FMDQ to activate its FX Order-Book systems as soon as possible and also accelerate the on-boarding of FX clients on the FX Relationship Systems to ensure total transparency of the FX market.

    Given the CBN’s objective to continuously and vigorously pursue a transparent, liquid, and efficient FX Market, the Bank reiterates it would neither tolerate unscrupulous actions nor hesitate to bring serious sanctions on offenders, be they banks or their staff.

    The Bank therefore encourages market participants to assist in ensuring that these new measures engender the preservation of our external reserves, stability of our financial system, and growth of our economy to the benefit of all Nigerians”.

    Following these changes, the Naira has gone from an all-time high of N522 to a dollar (as of 20 February 2017) to ₦450 to a dollar (as of yesterday, 27 February 2017) in the parallel market.

    Analysts have predicted the naira rate going as low as ₦400 to the dollar this week, following a further injection of $180,000,000 by the CBN, this week, into the Forex Market.

    This intervention of the CBN in the Forex market has been lauded by many based on the recent performance of the naira to the dollar. It is our hope that the CBN would sustain this supply of foreign exchange into the market, while other more permanent avenues for generating adequate supply of foreign exchange in the country, and strengthening of the naira, are explored.

  • Change in Definition of ‘Payroll’ for NSITF Contribution Purposes 

    The Employees’ Compensation Act of 2010 (‘the ECA’ or ‘the Act’), requires every employer to make a monthly contribution of 1% of ‘payroll’ cost to Nigeria Social Insurance Trust Fund (NSITF).

    Since the ECA has not provided a clear definition of ‘payroll’, the stipulated 1% had hitherto been applied on total emoluments.

    However, following a recent interactive session on <em>‘the Implementation and Administration of the ECA 2010’</em>, between NSITF and Nigeria Employers’ Consultative Association (NECA), both bodies have signed a Memorandum, clarifying amongst other things, the definition of ‘payroll’ for ECA levy computation purposes. This Memorandum was effective, 01 January 2017.

    Both bodies have now agreed to adopt the definition of ‘Remuneration’ as provided in the Act, as the new definition of ‘payroll’, with the exception of the following:

    Pension contributions

    Bonuses – performance related payments (whether monthly, quarterly or yearly)

    Overtime payments

    Irregular one-off payments (e.g. driver’s allowances, medicals, 13<sup>th</sup> month salary, etc.)

    The Act defines ‘Remuneration’ as basic wages, salaries or earnings designated or calculated, capable of being expressed in terms of money and fixed by mutual agreement, or by law, which are payable by an employer to an employee, for work done or to be done or services rendered or to be rendered; and allowances which include rental, transport, meals and utility or other allowances as may be determined by the Board, from time to time.

    Our interpretation of the above is that the ECA levy is still based on total employment benefits (including benefits-in-kind), but with the exception of the afore-listed items.

  • The Federal Executive Council (FEC) approves the revised National Tax Policy (NTP); moves to increase Value Added Tax (VAT) rate on luxury items.

    You would recall that in August last year (2016), we sent out a poll, requesting for your opinions in response to the call for policy recommendations by the NTP review committee. The revised NTP which was completed in September 2016 was approved yesterday, 1 February 2016, by the Federal Executive Council (FEC).

    The revised NTP has now been thoroughly simplified, re-written in a straightforward and easily understandable manner. Also, practical measures for implementing the Policy has been included. https://www.vi-m.com/wp-content/uploads/2017/02/Revised-National-Tax-Policy-FEC-Approved-2017.pdf -You can view/ download the full version here.

    Specifically, the revised National Tax Policy document contains measures designed to:

    Address multiplicity of taxes and multiplicity of Revenue agencies

    Reduce income tax rates and compliance burden for Micro, Small and Medium Enterprises

    Improve Nigeria’s ranking on the global ease of paying taxes index from the current position of 181 out of 189 economies to top 50 by the year 2020.

    Encourage diversification, expand the country’s tax base and improve Tax to GDP ratio.

    Secondly, the FEC, during its yesterday’s meeting, finalised plans to increase the rate of VAT on some luxury items- subject to the approval of the National Assembly. The proposed tax rate and the exact definition of luxury items were not made known, but the Minister of Finance, Kemi Adeosun, did cite example of champagne being taxed at 20% VAT rate in the UK.

    In January 2015 though, the then minister of finance, Ngozi Okonjo-Iweala, promulgated ‘luxury tax’ on ‘luxury goods’ and the items that classified as ‘luxury goods’ for the purpose of this tax include; private jets, luxury cars, yachts, champagnes, wines and spirits, first class international flight tickets, residential buildings in Abuja costing N300 million and above.

  • Transfer pricing toolkit for developing countries jointly released by IMF, OECD, UN and World Bank Group

    The Platform for Collaboration on Tax – a joint initiative of the International Monetary Fund (IMF), Organisation for Economic Co-operation and Development (OECD), United Nations (UN) and World Bank Group (WBG) – on 24 January 2017, released a draft toolkit addressing ways that emerging economies can overcome lack of comparable data or market prices for goods and services in the area of transfer pricing. The ‘Platform’ has asked for comments and input on the draft by 21 February 2017 from interested stakeholders to finalise the toolkit. Responses can be sent in through the Secretariats of the four organisations involved.

    The toolkit is a very insightful document which simplifies and addresses some of the challenges associated accessing comparables data (for benchmark studies). It also focuses on how to make the best use of available data and on the importance of the choice of the most appropriate transfer pricing method.

    Further, it describes issues and possible solutions when adequate data on transactions between independent parties are not available, including the potential for developing safe harbours or prescriptive approaches. Finally, due to the complexity of the topic, the toolkit sets out areas where further work is planned, and summarises a number of conclusions.

    https://www.vi-m.com/wp-content/uploads/2017/02/Toolkit-for-TP-in-developing-countries-discussion-draft-24-January-2017.pdf You can view/ download the TOOLKIT here.

  • FG Plans Special Tax Regime for SMEs

    The Federal Government of Nigeria is in the process of designing a special tax regime for Small and Medium-scale Enterprises in the country as a way of ameliorating the challenges of multiple taxation being faced by operators in the sector.

    The Minister of State for Industry, Trade and Investment, Hajiya Aisha Abubakar, at an event in Lagos on Sunday, November 13th, 2016 said that the government intends to leverage on technology to assist in establishing a system of taxation that would target the SME sector. The use of technology will ensure that the taxes are shared appropriately and will reduce the hassles of multiple taxation where different people come to require taxes of those in the Small and Medium-scale Enterprises.

    The FGN is tenaciously working on achieving this but it is not expected to become effective until mid-2017.

    In the meantime, our Vi-M Tax Assist software is available for use by taxpayers, particularly SMEs, and individuals, for free. It calculates monthly Value Added Tax, Withholding Tax, Pay-As-You-Earn (PAYE), Pensions and runs payroll/ pay slips, all for free. Users can sign up/ login at the upper right corner of www.vi-mtaxassist.com page to use the Tax Assist software for free.

  • FIRS and ECOWAS Partner to Boost Tax Administration.

    The Federal Inland Revenue Service (FIRS) and the Economic Community of West African States (ECOWAS) have initiated a partnership aimed at improving tax administration as well as addressing a range of investment policy issues that impinge on the ability of the private sector to invest efficiently across the region.

    This was kicked off during the first Transfer Pricing Regional Meeting for ECOWAS Member States<strong> </strong>in Abuja, Nigeria from October 11-13, under the European-funded<em> Improved Business and Investment Climate in West Africa </em>Project. The project seeks to address a range of investment policy issues that constitute barriers for the private sector to invest efficiently across the region. The transfer pricing component of this project is an example of the World Bank’s initiative to support domestic resource mobilization by helping countries to protect their corporate tax base from profit shifting.

    The meeting provided a platform for ECOWAS countries to take stock of the current state of transfer pricing in the region and to determine the direction of further progress.

    Over 60 participants, including tax administration and tax policy officials from 15 Member States of ECOWAS as well as representatives from the ECOWAS Commission, the European Union, West African Economic and Monetary Union (WAEMU), the World Bank Group, the Organization for Economic Co-operation and Development (OECD), the African Tax Administration Forum (ATAF), and the West African Tax Administration Forum (WATAF), all attended the three-day event.

    Speaking during the meeting, the Executive Chairman of Nigeria’s Federal Inland Revenue Service (FIRS), Mr. Tunde Fowler said that about $3.9 billion revenue is lost yearly by countries in West Africa through tax evasion by multinationals doing business in the region. He also disclosed that an estimate of $2.5 billion was reportedly lost by nations through transfer pricing. ECOWAS has now come out with an estimated $3.9 billion lost through this process.

    The transfer pricing program is an element of the <em>Improved Business and Investment Climate in West Africa Project</em>, a four-year initiative that was launched in November 2014. The €7.7 million project, funded by the European Union, seeks to support ECOWAS to improve investment policy in West Africa. The transfer pricing program is implemented by the World Bank Group, in partnership with OECD and ATAF. It is comprised of the following areas of support:

    Comprehensive reviews and recommendations on the transfer pricing rules of ECOWAS countries, including a detailed survey and report which was presented at the event.

    In-depth long-term support on transfer pricing policy, legislation, and implementation to three ECOWAS countries: Liberia, Nigeria, and Senegal (available to other ECOWAS countries from 2017)

    The development of tools to assist ECOWAS countries to increase their capacity on transfer pricing and related issues, and

    The identification of ways in which ECOWAS countries can mutually support each other in the development and implementation of transfer pricing rules

    http://guardian.ng/news/ecowas-countries-lose-3-9b-tax-income-yearly-says-firs/

    http://www.worldbank.org/en/news/press-release/2016/10/11/ecowas-member-states-take-stock-of-transfer-pricing-in-the-region-and-determine-the-direction-of-further-progress