Taxpayer identification number (TIN) is essential for opening a corporate bank account in Nigeria. A tax resident who supplies goods or services is expected to apply for TIN with the Federal Inland Revenue Service (FIRS). Thereafter, a taxpayer uses TIN for tax payment and filing of returns due to FIRS.
Recently, FIRS identified 6,772 businesses having an annual banking turnover of NGN1billion and above in the last 3 years. These businesses have TIN but are yet to pay taxes. Hence, FIRS appointed banks as collection agents of these businesses. Nominated banks would freeze taxpayer’s account balances for full or partial payment of tax liabilities.
Is FIRS empowered to confiscate properties or monies of defaulting taxpayers?
Section 31 of the Federal Inland Revenue Establishment Act (FIRSEA) 2007, empowers FIRS to substitute taxable persons by assigning any person as an agent of a taxable person. An “agent” may settle any taxes due by the taxable person using the taxable person’s money in its custody. Furthermore, FIRS can obtain complete disclosure of any monies or assets held on behalf of the taxable person by an ‘agent’.
The Federal Government of Nigeria intends to boost its non-oil sector through higher rate of tax compliance. Even though some businesses collect Value Added Tax (VAT) without remitting to government, VAT still contributes significantly to non-oil sector revenue. FIRS may stick to this tax recovery measure henceforth; if successful. A taxpayer can object to or appeal to FIRS notice of substitution. Affected taxpayers should assess the potential tax risk and initiate steps to minimise tax consequences.