The Government on 14th of June 2017, approved the signing by Nigeria of the Multilateral Instrument (MLI) to implement into bilateral tax treaties the tax treaty-related measures arising from the OECD / G20 BEPS Project to tackle base erosion and profit shifting. First signing ceremony held on 7th of June 2017 in Paris. That time, eight countries, including Nigeria formally expressing their intent to sign.
The BEPS recommendations combat tax planning strategies that exploit gaps and mismatches in tax rules to artificially shift profits to low or no-tax locations where there is little or no economic activity, resulting in little or no overall corporate tax being paid. The multilateral instrument will enable countries to adjust their bilateral tax treaties to include BEPS treaty-related recommendations without having to renegotiate each bilateral treaty.
The Finance Minister on 22nd May 2017, announced that 5 per cent increased interest charge would impose from 1st of July 2017 on firms that fail to fulfill their tax obligations as and when due as part of measures to sanction tax defaulters and enhance voluntary compliance on tax obligation. The Minister said the review of the interest rates on unpaid taxes was one of the necessary measures adopted by the Federal Government to enhance tax compliance, minimize tax evasion and deter late payments. Such defaulters would pay about 19 per cent on their obligation which is 5 per cent above the Central Bank of Nigeria (CBN) 14 per cent policy rate. The Government would expect that the directive would have been published in the Federal Government’s gazette.
The Federal Inland Revenue Service (FIRS) declares it will soon announce electronic Tax Clearance Certificate (TCC) system to assist reduce fraudulent certificates. The implementation of the e-TCC verification system had reached an advanced stage, adding that it was undergoing user’s acceptance test before deployment to production. It will provide an e-repository of all TCCs issued by FIRS. It automatically sends Tax Clearance Certificates to the emails of taxpayers and also enables them to request for and print their TCCs online. The FIRS also stated that the service recently commenced modalities for implementation of robust VAT automation device for power, insurance, financial services, e-commerce, telecommunications, and oil and gas sectors.
The Economic Growth and Recovery Plan for 2017 to 2020 has been published on 7th March 2017 by the Ministry of Budget and Economic Planning. It made a proposal on VAT rate in case of luxury goods increases to 15% from 5% and it will effect from 2018. It proposes to announce a system to permit for the immediate issuance of VAT and withholding tax certificates upon payment of invoices. It proposes for declaring tax on luxury items as well as other indirect taxes, revising all revenue-related laws and updating obsolete rates or tariffs, and increasing the verification tax compliance level prior to licensing a vehicle. This proposes for providing incentive investment via tax breaks. For example, accelerated depreciation on equipment
The Corporate Affairs Commission (CAC) announced the roll out of Form CAC 1.1 to replace and consolidate forms CAC 2, CAC 2.1, CAC 4 and CAC 7 (“the repealed forms”) on 24th February 2017 for the company registration. Companies in excess of five directors are also needed to complete the Additional Directors’ Form. This form is effective from 24th February 2017 and use of the repealed forms is permissible until 31st March 2017. The consolidated company registration forms are part of the reforms introduced by the CAC to improve the ease of doing business in Nigeria. Other proposed reforms contain the issuance of taxpayer identification numbers upon registering at the CAC, and the provision of e-stamps for stamp duties.
The Federal Inland Revenue Service (FIRS) of Nigeria published new transfer pricing (TP) forms (TP Declaration Form and TP Disclosure Form). This is aimed at improving disclosure and transparency by taxpayers in their TP Returns, and providing FIRS with better information for their use in conducting TP risk identification and assessment. The main updates include forms on low tax jurisdiction’s definition, foreign tax identification numbers of taxable persons, values of income received and costs incurred in relation to dependent and independent sources and names and jurisdictions of contracting parties to inter-company transactions. The instructions for completing these two forms (Guidelines:TP Declaration Form and Guidelines: TP Disclosure Form) were also published. These forms should contain audited financial statements, tax computations and self-assessment forms. With effect from 1st January 2017, all the taxpayers in Nigeria are need to file their TP returns using these new TP forms. The penalty applies in case of failure to submit annual tax return form by the due date.
The Finance Minister of Nigeria has issued amended regulations to increase the withholding tax (WHT) rate from 2.5% to 5% for all aspects of building, construction, and related activities (excluding survey, design and deliveries). The Regulation revokes the Companies Income Tax Amendment Regulations, 2015 to reverse the reduced rate, as recommended by the FIRS. A notice regarding the withholding tax rate increase has been released in the official gazette of 23rd November 2016. Taxpayers were directed to apply the 5% withholding tax rate from 9 November 2016.