Vi-M Professional Solutions

Tag: Public Notice

  • FIRS ISSUES PUBLIC NOTICE ON THE CLARIFICATION ON PAYMENT IN INSTALMENTS BY SELF ASSESSMENT FILERS AS APPROVED BY THE FINANCE ACT, 2019

    FIRS ISSUES PUBLIC NOTICE ON THE CLARIFICATION ON PAYMENT IN INSTALMENTS BY SELF ASSESSMENT FILERS AS APPROVED BY THE FINANCE ACT, 2019

    On 29th March 2021, the FIRS issued a notice to the general public, taxpayers and tax practitioners to cater for the clarification on tax payment in instalments by self-assessment filers as approved by the Finance Act, 2019.

    Section 18 of the Finance Act, 2019 which amended Section 77 (5) of the Company Income Tax Act (CITA), cap C21 LFN 2004 states that:

    “(5) Every Company shall make payment of tax due on or before the due date of filing in one lump sum or in instalments, provided that: where the taxpayer pays in instalments –

    • The taxpayer shall first write, with evidence of payment of the first instalment, and obtain the approval of the service to pay in such number of instalments as may be approved by the service; and
    • The final instalment must be paid on or before the due date of filing.”

    (5b) Any balance of taxes unpaid as at the due date shall attract interest and penalties as provided in the Act or any other relevant law for failure to pay on the due date in accordance.”

    The notice according to the FIRS, elucidates on the section above stating that “Any Company that wishes to pay by instalments must have applied in writing, before the due date of filing, attaching evidence of full payment of Tertiary Education Tax (TEDT) and first instalment of the Companies Income Tax (CIT) due. It is important to note that the last instalment must be paid on or before the due date for filing tax returns, otherwise penalty and interest will be charged after the due date.”

    All taxpayers have been charged to ensure compliance with the aforementioned provisions of the Act as failure to comply attracts the measures for the recovery of tax as enshrined in Section 85 (1) of CITA cap C21 LFN 2004 as amended and Section 32 of FIRS Establishment Act (2007), which authorize addition for non-payment and enforcement of payment.

    FIRS reaffirms that tax offices will provide adequate assistance to tax payers to satisfy the requirements of the Finance Act, 2019 as regards payments by instalment.

    Click here to view the FIRS Publication.

    For further clarifications or professional assistance in connection to this subject or any other matter, please contact Vi-M Professional Solutions on clients@vi-m.com or www.vi-m.com.

  • FIRS Issues Public Notice on Applicability of VAT & WHT on Compensations to Distributors, Agents, Others.

    FIRS Issues Public Notice on Applicability of VAT & WHT on Compensations to Distributors, Agents, Others.

    In its Public Notice of 14 August 2019, the Federal Inland Revenue Service (FIRS) has asserted that compensations/ commissions paid to agents, distributors, dealers and retailers by Principal Companies [with particular reference to those in the Fast Moving Consumer Goods (FMCGs) sector] are subject to Value Added Tax (VAT) at 5% (payable in addition to the compensation value) and Withholding Tax (WHT) deduction (by the principal companies).

    In practice, companies in the aforementioned sector (and companies in general who frequently make use of middle men to sell their goods or services) usually give out incentives and compensations to their dealers/ distributors/ retailers/ business partners etc. in the form of commissions, rebates; by cash, credit notes and goods in trade. The FIRS is saying by this Public Notice, that all such compensations, whether in cash or kind, must be quantified and subjected to the requirements of the laws on VAT and WHT.

    For reference, Value Added Tax (VAT) is a tax charged by the supplier of VATable/ taxable goods or service (in this case, the distributors/ retailers/ agents are the suppliers of this service) at 5% of the value of the VATable/ taxable supplies (goods and/ or services).

    Withholding Tax (WHT) on the other hand, is basically an advance payment of income tax which may be used to offset or reduce annual income tax liabilities. It is to be deducted by every taxpayer (who mandatorily becomes an agent of WHT once they are contracting with suppliers/ distributors/ agents/ dealers of goods/ services) at the point of paying or compensating the supplier/ dealer/ distributor/agent as the case may be.

    For further clarifications, agents of WHT include;

    1. Corporate bodies (companies).
    2. Individuals, firms, partnerships and sole traders.
    3. A statutory body, a public authority and other institutions or organizations.
    4. Government Ministry, Department or Agency and Local Government.

    Not all transactions are however subject to WHT. Certain transactions are exempted such as;

    1. Direct purchase across the counter.
    2. Direct purchase of raw materials from supplier as distinct from contract of supplies.
    3. Sale in the ordinary course of business.
    4. All imported goods.
    5. Inter-bank interest.
    6. Income exempted from income tax.
    7. Claims in insurance business.
    8. Interest on bonds.
    9. Dividends redistributed by Holding Companies.

    Rates of WHT for corporate and individuals on transactions are as follows: –

    TRANSACTIONSCOMPANIES (%)INDIVIDUALS (%)
    Royalties105
    Contract of Supplies55
    Contract of Construction55
    Dividend1010
    Technical Service105
    Professional Service105
    Consultancy105
    Management Service105
    Commission105
    Rent1010
    Interest1010
    Hire, Charter, Lease1010
    Directors fees1010

    For help with WHT and VAT compliance issues, please do not hesitate to send us an email via clients@vi-m.com, and we will get to you shortly.