The income of a person or company will be liable to tax in Nigeria based on residence. A local business that generates all its profits in the country is, thus, a tax resident in Nigeria. Yet, foreign individuals and companies outside Nigeria also derive income or profits from Nigeria. Will this category of taxpayer be liable to Nigerian tax? The provisions of the Companies Income Tax Act and the Personal Income Tax Act classify these taxpayers as non-resident persons (NRP) who are liable to Nigerian tax. Once a person is a tax resident, a taxpayer will then file a tax return to the local tax authority.
The Federal Inland Revenue Service (FIRS) has created an office for NRP. Effective January 2020, NRP will submit their tax returns to the Non-Resident Persons’ Tax Office (NRPTO) in Lagos state. The NRPT office is in the International Tax Department of FIRS at 17B Awolowo Road, Ikoyi, Lagos state. Furthermore, the NRPTO will also handle all correspondence and enquiry of non-resident persons; whether individuals or companies. Before, FIRS assigned tax office to NRP based on the amount of revenue or nature of the industry. For instance, separate offices for micro and small businesses, large organizations and companies in the upstream sector. A central system will, therefore, increase the level of service delivery to NRP.
Other benefits of creating a centralized tax office include higher tax certainty, voluntary compliance as well as lower tax disputes and double taxation. Even so, FIRS should fix some administrative issues to ease the transition. For example,
- Are NRP required to apply for the transfer of tax files from the old office to the NRPTO?
- Are NRP based outside Lagos state also required to submit their tax returns at the FIRS Ikoyi office?
- Will FIRS create “liaison” offices in other locations?
Above all, FIRS may consider e-filing or “liaison” offices for non-resident taxpayers outside the Lagos state to encourage voluntary compliance.