Remedying Tax Defaults and Backlog
Project Name: Remedial Tax & Accounting Services
Client: A Leading Printing Press Company, involved in designing, packaging & rendering printing services to customers
Project Commencement Date: May, 7, 2018
Project Completion Date: June 30, 2018 (phase 1), 30 September (phase 2)
Project url: www.vi-m.com
Following the pasting of multiple non-compliance stickers on our client’s premises, and promise of distrain in 7 days by the Federal Inland Revenue Service (FIRS), we, Vi-M Professional Solutions were contacted to assist the client in resolving and remedying 17 years of tax default.
We swiftly commenced with a meeting with the tax office, submitting our letter introduction and soliciting their support and corporation, by allowing us more time to review the client’s records.
The same day, we were also able to get the tax authority to remove the non-compliance stickers placed on our client’s premises. Having also obtained a 2-months grace period from the FIRS, we commenced work on preparing the necessary documentation to aid the client in appreciating the tax exposures due.
The challenge was that the client:
- Had never had its accounts audited by professionals in the 17 years of being in business
- Had never filed its tax returns nor paid the associated taxes. The only taxes paid were the withholding taxes erroneously withheld by its customers (as the client supplies printed goods in its ordinary course of business) in its earlier years
- Had a deemed Value Added Tax (VAT) and Companies Income Tax (CIT) liability totalling N800million from the FIRS.
- Was broke owing to the loss of its biggest customer
- Was in debt, owing to the asset financing arrangement it had with banks on its printing machines
- Had a good case on its Value Added Tax as it printed mostly for pharmaceutical companies and Non-Governmental Organisation.
Our execution strategy and goals (which were all achieved) were to:
- Appeal to FIRS to allow the company file returns under the Voluntary Assets and Income Declaration Scheme (VAIDS), which would cover accounts for only 6 prior tax years- July 2011 to June 2017 (instead of the outstanding 17 years!), and an appeal for extension of period for filing of tax returns communicated via their letter.
- Prepare audited accounts – June 2012 to June 2017
- Review the companies income tax (CIT), deferred tax and tertiary education tax (TET) computations for tax years- 2013 to 2018, based on audited accounts for 2012 to 2017. Submit the CIT and TET returns for the 6 tax years.
- Review and file Value Added Tax (VAT) returns for 82 months from July 2011 to April 2018.
- File all under the VAIDS (whose deadline was 7 weeks away, as at the time the engagement commenced)
- Reduce tax liability drastically and apply for instalment payments to enable client pay.
In the end, we were able to:
- Get FIRS’ approval to file under the VAIDS
- Meet up with the VAIDS deadline and file returns for only the 6 prior years
- Reduce the cash tax liabilities payable to N8 million
- Obtain an 18-month instalment payment arrangement for the N8million cash tax liability.
- Make effective use of the client’s withholding tax credits to offset the cash CIT payable
- Extinguish the VAT liabilities assessed by the FIRS based on supplies to NGO and pharmaceutical companies.
Working with Vi-M Professional Solutions, afforded by business the opportunity to concentrate on our core business operations at that time, which enabled us to bounce back. Our business partner – Vi-M was able to handle the tax issues we had and helped mitigate the awkward situation we were in at that time, a situation we had given up on and even considered shutting down the business for good. They assisted in auditing our annual financial statements, tax computations and submitted same to the tax office. They had a good understanding of our business and peculiar operational situations, which was critical to their service delivery. The same set of persons who interacted with us from the begin where also the same set of team members who saw to the completion of our assignment. We are indeed pleased with the Firm and look forward to a more mutually beneficial business relationship.
Client name (withheld), Managing Director
A Leading Printing Company in Lagos, Nigeria