On 19 August 2019, the Federal Inland Revenue Service (FIRS) issued a Public Notice, directed at all tax defaulters whose bank accounts had been placed under lien earlier in the year. A list of 19,901 such tax defaulters was also published by the FIRS. These tax defaulters were defined as entities with an annual turnover of N100 Million and above, that have been collecting Value Added Tax (VAT) as well as deducting Withholding Tax (WHT) without remitting same to the Government.
In its 19 August Public Notice, the FIRS called on all companies whose bank accounts were placed under lien but are yet to regularize their tax statuses, to do so within 30 days from 19 August 2019, or have their Principal officers face penalties as stipulated under section 49 (2) (a- d) of the Federal Inland Revenue Service Establishment Act (FIRSEA), without further notice after the 30 days.
Section 49 (2) of the FIRSEA stipulates that: “Where an offence under this Act is committed by a body corporate or firm or other association of individuals-
(a) every director, manager, secretary or other similar officer of the body corporate;
(b) every partner or officer of the firm;
(c) every person concerned in the management of the affairs of the association; or
(d) every person who was purporting to act in any capacity, commits an offence and shall be liable to be proceeded against and punished for the offence in like manner as if he had himself committed the offence, unless he proves that the act or omission constituting the offence took place without his knowledge, consent or connivance.”
Steps to lift lien on an account:
1. Make payments of applicable taxes for the period(s) in debt.
2. Visit the closest Substitution Review Unit (SRU):
- Fill Taxpayers form as required. Attach evidence of tax payments made, alongside the following:
- A letter to the ECFIRS on response to the substitution on your account; Attach to letter:
- Copy of your last filed return
- Copy of current tax clearance certificate
- Bank statement for 3 years
- Copy of incorporation and commencement of business (Incorporation documents and documents to show when business commenced).
3. State Sources of income if Loan; or operate Bureau de Change etc.
4. SRU team will analyze and give feedback.
These details can also be sent to email@example.com.
For help with preparing and submitting the required documentations, please send your detailed needs to firstname.lastname@example.org.
To avoid a tax lien and/or other tax issues, the following are advisable:
- Once a new business/ Nigerian subsidiary or related entity is registered or incorporated, tax compliance should commence. Both the cost of engaging a good professional tax advisor/ accountant and the tax liabilities will be lower, well planned and properly managed from this stage.
- Anger at Nigeria’s tax of fiscal system and Government’s lack of significant support for businesses and citizens cannot wipe off tax obligations. Tax is a civic responsibility, and the law.
- Avoid bribing tax officials or illegally ‘negotiating’ tax payments. One cannot successfully maneuver taxes by bribing tax officials. It will always come back to hunt the taxpayer.
- The government means business when they say there is no hiding from tax anymore; one can learn this from this episode of tax lien on bank accounts. Some avenues through which the government mines information on tax defaulters include: records of foreign exchange transactions, Corporate Affairs Commission (CAC) records, Bank Verification Number (BVN) records, withholding taxes (WHT) deducted by your customers from your business invoices and paid to the tax authorities, records of landed properties, vehicle registrations etc.
- There is no tax-free period whatsoever on commencement of business. Taxes apply from commencement of business. Companies Income Tax (CIT) even starts counting right from the date of incorporation.
- Every business should strive to keep proper and reliable financial records. It helps to facilitate good business decisions, keeps all stakeholders correctly in the know about the state of the business, controls fraud and mismanagement of business resources, is a legal requirement (by the Companies and Allied Matters Act), and will be the organization’s defense in the face of tax issues. The business’ transactions can also be planned for optimum tax effectiveness.
- Knowledge of the tax laws is very important. Vi-M has made this extremely handy by compiling the tax laws in a handy and readable app – ‘Tax Law Book’on google play and app store.
- For start-up businesses, vi-mtaxassist.com is helping over 1,300 users to compute their monthly taxes – VAT, WHT and PAYE. The web application is FREE TO USE.
- For growing businesses, Vi-M’s monthly and annual Tax and Accounting Services Coverplans have helped a lot of businesses stay tax compliant as well as have good, credible and up-to-date financial records.
- For fairly new businesses with backlog of outstanding accounting and tax related tasks, Vi-M’s Post Start-Up Assistplan has also helped a good number of businesses.
- We are now extending an offer of installment payment of our fees (for up to 6 months) on the Post-Start-Up Assist plan to help growing businesses stagger the cost of compliance/ regularization in a struggling economy.
- We are also extending an offer of very discounted fees on tax health check for any business who may require such.
- Businesses operating a group structure or within a circle of related companies should ensure their Transfer Pricing obligations are fully satisfied.
- On-going tax checks and reviews to ensure that your company is fully compliant is key. If one thinks the cost of compliance is high, one should not wait to experience or deal with the cost of remedying non-compliance or paying penalties to the tax authority!