Nigeria: VAIDS: The Fast Closing Window For Forgiveness Of Tax Defaulters

Last Updated: 19 March 2018
Article by Arinze John-Paul Nsofor

Payment of tax is a mandatory financial obligation, levied by law on individuals as well as corporate persons. It requires the remittance of a determined amount of money to the government, through various statutory bodies saddled with the responsibility of collecting tax. The failure to honour this sacred civic duty, is an offence punishable in certain instances, with criminal sanction under Nigerian tax laws. Nigerians have over the years, managed a shaky relationship, at best, with the tax-man. However, in a bid to encourage tax compliance, the Federal Government of Nigeria in 2017, initiated a program called the Voluntary Assets and Income Declaration Scheme ("VAIDS").

The objective of the VAIDS program, is to grant a full amnesty of sorts, to tax defaulters who voluntarily submit themselves to tax assessment of default tax periods, before March 31, 2018. With the promise of forgiveness from both criminal prosecution and the sundry penalties for late or non-filing of tax returns, understandably, Nigerians have rushed to take advantage of the program. Ordinarily, default in meeting tax obligations, may render the defaulter liable to a jail term, payment of the original tax liability as well as a penalty sum and interest on the outstanding liability. It is for this reason that Nigerians; particularly Nigerian companies are encouraged to understand and avail themselves of the advantages inherent in the VAIDS scheme, to avoid the consequences of default beyond the government sanctioned deadline.

The VAIDS scheme is targeted at two broad categories of persons. Those who have under-declared their assets and/or income, and those who have failed to remit tax in entirety for various taxable periods. Some of the benefits of obtaining relief through VAIDS, are that affected persons are then at liberty to enter into arrangements with the tax authority to offset their obligations by instalment for a period of up to 3 years1. Where payment is to be by instalment, the defaulter may be required to pay interest on the outstanding tax liability, subject to the specific arrangement entered with the relevant tax authorities. As a note of warning at this point, under the scheme, disclosure of any information relevant to obtaining relief per the terms of the scheme, must be full and frank. Not only does 'incomplete' disclosure constitute a separate offence,2 but the tax authority has wide powers to reassess liability3.

What to Declare and How

Generally, there should be 'full' declaration of income and assets using the Voluntary Asset and Income Declaration Scheme forms (VAIDS forms) as prescribed by the VAIDS Executive Order. This means effectively that all income from profits, wages, rents, dividends and interests are to be declared. Even where the income is derived from a source outside Nigeria; irrespective of its description, same, being generally subject to tax, should be declared. However, income earned outside Nigeria is not taxable, unless it is repatriated to Nigeria.

There are many other complexities surrounding which income is taxable and which is not. For instance, interest, fees or rent received in Nigeria from abroad through approved channels, are tax exempt, e.g. rent on foreign property or interest or dividends paid pursuant to a trust. However, where incomes are derived or received in Nigeria from a source abroad outside approved channels, they are subject to tax. Further, whilst disposal of assets is taxable, disposal of a gift by way of gift is not taxable. On the flip side, where income is derived from the disposal of a gift; either by way of lease or assignment, the income will be taxable.

It suffices to say that there is no 'general rule' regarding tax obligations. They can be as varied as the individual circumstances of each tax payer and should not be approached with the lens of 'one size fits all'. Sometimes, it is the instrument of disposal of an asset which gives rise to a tax obligation (i.e. payment of stamp duties) even where the disposal was a gift, and not itself taxable. Again, some tax obligations may arise when income has passed through Nigeria, even though same was eventually used to purchase property outside Nigeria. As can be seen, though the VAIDS Executive Order prescribes that declarations be made using the relevant VAIDS form, the process of assessment on such declared income and assets can be extremely complex and cumbersome. It is advised that persons and companies who would avail themselves of relief through VAIDS, seek the counsel of experienced legal practitioners or tax advisors to guide them through the process, to ensure that they are not unduly saddled with tax obligations; or conversely, fall short of expected tax and remain liable to future penalties.

The VAIDS scheme is commendable, no doubt – particularly when compared with the alternative. The consequences of failure to pay tax include: public and often shameful closure (for companies) and investigation by way of tax audit4; assets and properties may be distrained5; prosecution for the offence of tax evasion6; liability for interest on the assessed outstanding tax7, and payment of penalties8.

In sum, VAIDS is a welcome innovation in the Federal Government's bid to generate more revenue through efficient tax collection and/or administration. Judging from its widespread success in generating revenue and bringing much needed awareness of tax obligations of various citizens and corporate bodies, it is hoped that state governors will authorize similar tax amnesty programs, as a means of generating income, and to bring majority of Nigerians into full compliance with tax laws at both state and federal levels.


1. It appears that this provision of the VAIDS was informed by judicial authorities which seem to suggest that Tax authorities can enter into agreements with tax payers with regards to tax liabilities. See Shell v. FBIR (1996) 8 NWLR (Pt. 446) 256

2. Section 94 of the CITA; Section 53 of PPTA; Section 96 of the PITA; Section 25 of the VAT.

3. Section 55 of the Personal Income Tax Act (PITA); Section 66 of the Companies Income Tax (CITA); Section 36 of the Petroleum Profits Tax Act (PPTA).

4. Sections 48 (4), 49 &53 OF PITA; Sections 60,61 & 64 of CITA; Sections 31 & 32 of PPTA

5. Section 86 of the CITA; Section 104 of the PITA

6. Section 74 & 76 of PITA; Section 82 & 85 (2) & Section 92 of CITA;

7. Section 85 (1) of the CITA; Section 77 of the PITA.

8. Section 85 (1) of the CITA; Section 76(1) of the PITA.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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