The Federal Inland Revenue Service (FIRS) recently extended invitations to taxpayers to come forward to reconcile their unutilised Withholding Tax (WHT) credit balances, with a view to confirming these balances with them and uploading same in the newly created Standard Integrated Government Tax Administrative System (SIGTAS).
The SIGTAS, a process automation initiative by the FIRS, has the capability of eliminating the bottlenecks associated with the existing paper-work system of WHT credit reconciliation, credit notes collection and utilisation. When the SIGTAS is fully operational, taxpayers would be able to electronically view their WHT balances and automatically take credit for WHT deducted by their customers and remitted to the FIRS. Without any doubt, the introduction of the SIGTAS in the management of the WHT system in Nigeria should positively impact taxpayers, given that it would save time and resources that would have been expended on sometimes unending reconciliation of WHT positions, and the pursuit of actual WHT credit notes from customers who effected WHT deductions and remitted same to the FIRS.
While the FIRS ought to be commended for this new initiative, the manner and approach of its implementation appear to be detrimental to the interest of some taxpayers. As noted in one of the letters written by the FIRS to a client, the company was requested to provide relevant documentary support to evidence any unutilised WHT credits, and the FIRS hinged the failure to comply with its request within a 15-day period, as a convincing ground to deny the company of the future use of any yet-to-be-confirmed WHT credits. This disposition from the FIRS suggests a deliberate attempt by the tax authority to set a time-frame for the utilisation of a taxpayers' WHT credits. This article seeks to examine the legality or otherwise of imposing a deadline on taxpayers' rights to utilise their WHT credits.
Practical challenges that may limit taxpayers' ability to reconcile WHT credit positions
The WHT system, as administered in Nigeria, is fraught with a number of challenges that may limit the ability of a taxpayer to completely reconcile its WHT position within a given timeline. These challenges are intrinsically connected to the responsibilities imposed by the enabling tax laws and regulation that provide the legal basis for the operation of the WHT system in Nigeria.
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