Neutralising the Fear of Tax Audits
Project Name: Tax Audit Support
Client: Various clients in diverse industries
Project Commencement Date: September 2016
Project Completion Date: On-going
Project url: Project URL
Tax audit is one of the reasons why many business owners in Nigeria have sleepless nights.
This is largely because tax authorities in Nigeria can be highly unpredictable. Another scary reason is that the consultants who act as agents to the tax authorities on tax audit exercises are remunerated based on the margin of tax revenue they are able to generate; making it technically compulsory that additional tax liabilities ‘must’ result from every tax audit performed, regardless of whether the company under review had been tax compliant to not.
In our work in the field of taxation, we have effectively supported many clients through successful tax audit exercises amidst serious odds, owing to the following:
- Our relationship with the Federal Inland Revenue Service (the FIRS) – in case of FIRS tax audits;
- Our relationships with the various state boards of internal revenue – in case of state tax audits
- Our tax technical proficiency- thorough theoretical and practical understanding of the tax laws and practice in Nigeria
- Our long years of experience in this field (near daily liaison with the tax men and woman and consequently, our understanding of their ways and 100% ability to pre-empt what they would do)
- Our doggedness – never giving up, never backing down, never succumbing under pressure to tax positions that are higher than what our clients are actually owing
- Our understanding of the various industries and sectors, the taxes/ practices that normally pose tax challenges in those sectors, the tax precedents around them and the acceptable tax outcomes
- Our thorough understanding of financial accounting, how to navigate the accounting records (from source documents to final accounts), what to look out for, what the tax authorities look out for, our understanding of the weaknesses of the tax people when it comes to navigating financials and how to guide them to avoid over-bloated additional tax liabilities at the end of their work. This helps us adequately support our clients pre-and post the field work by the tax people, and throughout the reconciliation process.
The challenges usually involved in Nigerian tax audits include:
- The duration of tax audits – takes a very long time to conclude
- Unending back and forth with the tax authorities who technically are out to compulsorily make money from additional tax payments by the company under review
- The lack of proper accounting and documentation by many businesses
- The unpredictable nature of the tax man in Nigeria
- The limitless power that the tax laws give to the tax man, making it very difficult to put the technically knowledgeable tax man in a box (in pressured tax dispute situations)
- Non-compliance to tax by businesses, and poor tax/ accounting practices
Our execution strategies include psychological, technical and physical approaches.
For FIRS tax audits, we would usually:
- Review of all documents requested for by the FIRS, carry out a pre-audit tax review to ascertain the true tax position of the business;
- Assist with the computation of the company’s ‘undisputed tax liability’;
- Respond to the tax audit notification letter with a ‘yes, our client is ready’ or ‘no, please hold on till some definite date’;
- Sit in and support the client during field audit- collating, arranging and reviewing all documents requested for, ensuring that the tax people are promptly and politely attended to;
- Attend to, and provide technical support during all tax audit reconciliation meetings;
- Follow up to obtain a favourable ‘letter of intent’ reflecting the Company’s agreed position.
For State tax audits, we would usually:
- Repeat steps 1 to 5 above, but as it pertains to the state.
- Help out with expatriate tax resolution, which is always a knotty issue for companies working with expatriates, during state tax audits
- Put together all necessary documentations like expatriate employment letters, monthly returns, deletion slips, details etc.
- From our vast knowledge of enabling legislation, payroll and applicable practices in all the industries, hold superior arguments and use our best relationships and assertive nature to bring the tax audit disputes to prompt closures.
- Assist the client in obtaining an audit clearance letter as soon as the undisputed liability is paid.
Some of our notable achievements in the field of tax audits include:
- Our partner, Magnus was once the unit head of the state tax audit department at KPMG professional services- in this role, he has built strong relationships with the state tax authorities, so much so that he has resolved several tax disputes for Vi-M’s clients in ONE DAY
- Obtaining a TAX CREDIT position on an LIRS endorsed letterhead for our client
- Obtaining a reduction in intended tax audit period, from the initially scheduled 6 years, to only 2 years
- Settling Economic and Financial Crimes Commission (EFCC) tax dispute with one of our clients regarding accrued tax liabilities in a particular state, in one day.
- Our partner, Vivian has worked with the FIRS on a number of initiatives – training FIRS officials on International Financial Reporting Standards (IFRS), working with the FIRS (and most of the top directors) on the tax technical series- ‘Tax Discourse’, making her deeply understand their ways and how to navigate every tax dispute with them. Vivian has also resolved several tax disputes in ONE DAY.
- Settling expatriate tax issues and obtaining very favourable deemed remuneration positions from the state tax authorities, where our clients’ documentations on expatriate remuneration are incomplete.
- Closing tax audits fast
- Obtaining waivers of interest and penalty
- Obtaining waivers of tax liabilities and securing payment in instalments- where the undisputed tax liability is huge, the client is willing to make remedial payments but is apparently unable to pay.
Vi-M Professional Solutions is a firm that would always deliver. They are quick to setup the engagement, arrange a kick off meeting and ensuring adequate resourcing. On this engagement, I worked very closely with Magnus Nmonwu, who was responsive and open to all manners of feedback. He in turn ensured that he provided adequate feedback to us on this assignment. He represented the company very well and ensured that the ultimate objective of resolving the tax dispute and collecting Tax Clearance Letter was achieved within the agreed time frame. I will always like to work with Magnus and his Firm.
Client Name (with held), Finance Manager
Oil & Gas Services Firm