On October 5, 2016, the Nigerian Federal Inland Revenue Service (“FIRS”) issued a public notice granting a three year tax amnesty to defaulting companies (the “tax amnesty program”). The goal of the tax amnesty program is to promote voluntary tax compliance and shield taxpayers from the burden of carrying forward old tax liabilities arising from penalty and interest. Prior to the notice, there had been increased discussions on the value of granting tax amnesty to increase tax compliance. These discussions were incorporated in a document containing the Revised National Tax Policy which is yet to be implemented.
In the Revised NTP, tax authorities are mandated to ensure development of frameworks for tax amnesty. The power to grant such amnesty is also statutorily codified in section 85(3) of the Companies Income Tax Act. Under the section, the Federal Board of Inland Revenue (“FBIR”) can forgive penalties and interests accruing to defaulting companies upon a showing of good cause. The tax amnesty program is a further affirmation of the FBIR’s authority to forgive penalties and interest.
However, there are conditions that must be satisfied- companies must voluntarily declare their indebtedness within a 45 day window (commencing on October 5, 2016 and ending on November 24, 2016). Additionally, they must present a payment plan on their outstanding principal tax liability which is acceptable to the FBIR. A reasonable amount that would be considered acceptable is 25% of undisputed tax liabilities. The waiver only operates from 2013 – 2015 taxable years.
Companies which fail to take advantage of the tax amnesty program would be made to face the full wrath of the law including criminal prosecution. Although there are insufficient data estimating the expected benefit to the government, it is hoped that the tax amnesty program would recover lost revenue due to non-payment of corporate income taxes.