The tax landscape in Nigeria is changing fast and efforts at bringing taxable individuals into the tax net is gaining momentum. Those who have not been tax compliant in the past are being advised to take advantage of the 9-month tax amnesty scheme through Voluntary Assets & Income Declaration Scheme (VAIDS) before the door closes by 31 March 2018.
As part of the implementation of VAIDS, many high net worth individuals (HNIs) and very important personalities (VIPs) have been receiving letters from Ministry of Finance (MoF) and various State Boards of Internal Revenue Services on their tax status, requesting them to take advantage of VAIDS to regularize their tax status.
The first set of letters were issued last year following a special data mining project ("Project Lighthouse") carried out by MoF in preparation for aggressive tax chase upon expiration of VAIDS. Data from sources such as Bank Verification Number (BVN), foreign exchange application, land registry, company dividends, car registration, Corporate Affairs Commission, foreign property ownership etc. were gathered and compared with tax returns. As generally expected, there was a massive gap of non-compliance across the country.
The depth of available information will become staggering as soon as Nigeria receives its first data exchange under the newly signed automatic exchange of information. The UK has also signed "Unexplained Wealth Order" (UWO) which became effective in January 2018. Under UWO, properties in the UK with no justifiable source of earnings and evidence of tax payment in country of residence will be forfeited to Her Majesty's Revenue and Customs (HMRC). There are fears that Nigerians will be largely affected by this Order.
Tax Authorities appear to be warming up for aggressive chase of defaulters upon expiration of VAIDS. Unless an unexpected overriding political consideration weighs in, defaulting HNIs would come under serious scrutiny, going forward.
It is therefore imperative for HNIs, VIPs, and indeed all taxable individuals, to be aware of how critical it is to take advantage of VAIDS while the window remains open. Companies will also need to step up their background checks and compliance monitoring on their Executive and Non-Executive Directors to prevent reputational damage that may be associated with tax prosecution.
Deloitte's team of private wealth management and global employer services professionals are available to assist HNIs and VIPs to regularize their tax status and turn green on their compliance status.
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.