In a bid to grow Nigeria's tax revenue and raise non-oil tax to GDP ratio from current level of 6% to 15% by 2020, a Voluntary Asset and Income Declaration Scheme (VAIDS) is to be implemented. The National Executive Council (NEC) has granted approval-in-principle for this new scheme subject to finalisation of the broader framework.
The primary objective of VAIDS is to encourage voluntary declaration of undisclosed income and assets with consequential payment of applicable tax liabilities over a defined period. It is expected that this window offered to those who have not complied with extant tax regulations will simultaneously generate revenue and encourage investment and economic activity. An estimated revenue of US$1 billion is projected from the scheme.
Key highlights of VAIDS include:
- Commencement date: the scheme is expected to kick off from 1 May 2017 with incentives put in place to encourage early participation.
- Taxes covered: all taxes collectible by the State and Federal Governments are covered by the scheme. This includes Companies Income Tax, Personal Income Tax, Petroleum Profits Tax, Capital Gains Tax, Stamp Duties, Tertiary Education Tax, Information Technology Levy.
- Assessment period: the window will be opened to all back duty taxes with no limitation as to how far back.
- Timeframe for declaration and payment: taxpayers who sign up to the scheme will be allowed a maximum timeline of three years to spread the payments of outstanding liabilities.
- Eligible persons: applicable to all taxpayers, with key focus on multinationals and high net worth individuals.
It is expected that the final framework will address other issues such as:
- application and participation process
- incentives for early adoption by taxpayers
- modalities for installment payment plan
- impact on on-going tax audits and investigations
It will be recalled that the Federal Inland Revenue Service introduced a similar program in 2016 which was claimed to have raised substantial revenue for the government. It will therefore be interesting to see the potential impact of VAIDS which appears to be broader in scope. Perhaps, the revelation by the Government that only 214 individuals pay more than N20million in annual personal income tax in the entire country is about to change for the better.
We will continue to monitor developments in this space and update you as further facts become available. In the meantime, we advise taxpayers to consider a tax health check and evaluate potential tax exposure with the aim of closing any identified compliance gap(s).
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.