The Finance Minister of Nigeria, Kemi Adeosun and the Minister of State for Trade and Investment of Singapore, Dr Koh Poh Koon, signed an Income and Capital Tax Treaty on August 2, 2017 for the avoidance of double taxation. According to the Finance Minister this treaty would help inter-state trade as well as economic and business activities by ensuring that nationals or enterprises of the two countries are not taxed twice on the income from profits derived from the other country.
Nigeria: Government clarifies 27 new industries and products to enjoy tax holiday under pioneer status
The Federal Government gave clarifications on August 9, 2017 regarding businesses that would qualify to enjoy pioneer status under the extra 27 new industries and products for inclusion in the list of “pioneer industries” and “pioneer products”. Pioneer status is available to companies making investments in eligible industries and products. They can qualify for an exemption from company income tax for an initial period of 3 years to 5 years. This measure was approved by the Federal Executive Council (FEC) on August 2, 2017.
According to the Executive Secretary, Nigeria Investment Promotion Council (NIPC) pioneer status does not relate only to new industries or entrants to the economy. It can also be granted in a situation where the country did not even have an industry at all, or the industry did not have sufficient presence to contribute significantly to economic development. In trying to encourage the establishment or growth of the industry and the economy, the Nigerian government decided to look at its priority sectors in the Nigerian Industrial Revolution Plan, NIRP, and the Economic Recovery and Growth Plan, ERGP, by promoting the 27 industries and products in the approved status document. Businesses that have existed for several years in a specific sector may not get the pioneer status, unless those companies have ventured into a brand-new line of business covered under the list of 27 new industries and products.
The list of 27 industries and products issued on August 7, 2017 includes mining and processing of coal; processing and preservation of meat/poultry and production of meat/poultry products; manufacture of starches and starch products; processing of cocoa, manufacture of animal feeds; tanning and dressing of leather; manufacture of leather footwear, luggage and handbags; manufacture of household and personal hygiene paper products; and manufacture of paints, vanishes and printing ink and so on.
According to an announcement from the Finance Ministry, a new tax amnesty called the Voluntary Assets and Income Declaration Scheme (VAIDS), entered into force on July 1, 2017 for both individuals and corporations. The amnesty aims to raise tax awareness and increase tax compliance. It gives a nine month timeline for taxpayers to regularize their tax position with the federal and state governments without being liable to any tax penalty or facing prosecution for default. The amnesty offers a waiver of penalties, no prosecution of tax offenses and no tax audit. The tax amnesty continues from July 1, 2017 to March 31, 2018.
During Nigeria’s plenary session on 25th May 2017, the Senate passed the Petroleum Industry Governance Bill (PIGB). The PIGB is only a segment of the original Petroleum Industry Bill (PIB). The bill splits the Nigerian National Petroleum Corporation (NNPC) into two, namely National Petroleum Company (NPC) and the Nigeria Petroleum Assets Management Company (NPAMC).
The draft law proposed the establishment of the Nigeria Petroleum Regulatory Commission (NPRC) to serve as the guide for licensing, monitoring, regulations and standards across the value chain, supervision of petroleum operations enforcing laws. In accordance with the draft law, the companies would absorb the present Department of Petroleum Resources, Petroleum Products, Pricing and Regulatory Agency (PPPRA) and the Petroleum Equalization Fund (PEF).
This Bill seeks to give instructions and institutional framework for the Nigerian Petroleum Industry and create clear separation between, the policy, regulatory and commercial organizations. When enacted, the PIGB will seek to create effective governing institutions with clear and separate roles for the Petroleum industry, establish an outline for the creation of commercially-oriented, profit driven petroleum entities that ensures value addition and internationalization of the petroleum industry, promote transparency and accountability in the administration of petroleum resources in Nigeria, and build a conducive business environment for petroleum industry operations.
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 Federal Government announced on 22 May 2017 that it would apply an additional 5 per cent charge from 1 July 2017 to companies that do not meet their tax obligations if they are involved in measures to sanction taxpayers and to voluntarily comply with them of the tax obligations. 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.