One of the objectives of the Nigerian tax system is Flexibility. Taxes in Nigeria should be flexible enough to respond to the changing environment. Taxpayers are a major stakeholder in the Nigerian tax system. Without taxpayers or taxable activities in the economy, there will be minimal need for tax authorities.
Work-from-home policy, supply-chain interruptions, restricted travel, and other related issues to the spread of the coronavirus disease (COVID-19) make it tough for businesses to collate their tax records or pay taxes early. Individuals may have to travel to the different state tax authorities to file personal annual tax returns (Form A). Accountants, external auditors and tax consultants in Nigeria often depend on tax information from clients in the COVID-19 risk zones.
However, people in the risk zones have been forced to close businesses and stay indoors for a while. Some businesses in Nigeria also must obtain approval from an offshore entity to submit all statutory returns and financial statements. Where the company overseas has shut down operations, getting the necessary approvals from the responsible person may be difficult. The safety and welfare of Nigerian citizens should supersede the need to meet the tax deadline. These factors call for extending tax deadline during coronavirus risk. Therefore, the Nigerian tax authorities and the Federal Government of Nigeria must grant taxpayers a level of relief in the rapid health emergency.
Here are key points to note on tax payment and filing
- Payment and filing deadline for tax returns due to the Federal Inland Revenue Service (FIRS) and relevant State Inland Revenue Service. Value added tax (VAT) and withholding tax (WHT) returns for February 2020 will be due on 21 March 2020. The tax authority for VAT is FIRS while WHT is payable to the relevant tax authority of the vendor.
- For old companies with financial year-end of 30 September 2019, the returns for companies’ income tax, tertiary education tax, national information technology development fund levy and capital gains tax are due on 31 March 2020. These returns will be filed and submitted to the FIRS.
- Individual annual tax returns are due on 31 March 2020. The relevant tax authority is the relevant State Inland Revenue Service across the 36 states in Nigeria and the Federal Capital Territory, Abuja.
- Section 18 of the Finance Act 2019 provides that companies must pay income tax on or before the due date of filing. No provision for an extension of time to pay taxes after the due date. In contrast, the conditions for granting an extension of time to file tax returns under Section 14 of the Self-Assessment Regulations 2011 are the death of the individual taxpayer or in the case of a company, death of any principal officer or where fire or natural disaster occurred during the period of filing. Nevertheless, local tax authorities should be flexible in the overall welfare of taxpayers as the current pandemic is a global health concern.
Recommendations for extending tax deadline
- The tax authorities should extend the deadline for payment of taxes and filing annual returns due in March 2020 by ninety (90) days. For annual returns due in April 2020, taxpayers should have an extension of sixty (60) days.
- For monthly returns, the tax authorities can extend deadline by thirty (30) days.
- Based on (1) and (2) above, the regulatory authority should grant a waiver on penalty on late filing of tax returns as well as waive penalty and interest for late payment of taxes.
- FIRS may consider the need to reactivate the portal for online submission of value added tax and income tax returns. Taxpayers will be able to submit tax returns online without a physical presence at the tax office. Good enough, some state tax authorities have fully automated the process of filing annual tax returns. Other state tax authorities may need to develop a platform for electronic filing rather than the manual submission for ease of compliance.
Therefore, local tax authorities should consider extending tax deadline in Nigeria as well as waive penalties and interest charges for taxpayers. It will also be heart-warming to see the Nigerian tax authorities rise to the occasion and show sympathy in their tax administration. The time to act is NOW.