In August 2018, Nigeria's Federal Inland Revenue Service (FIRS) issued the Income Tax (Common Reporting Standard) Regulations ("CRS Regulations") to provide legal backing for CRS implementation in Nigeria. The Common Reporting Standard or CRS is a set of rules for automatic exchange of financial account information between the tax authorities of countries that have opted to make such exchanges.

You may already know that Nigerian financial institutions must file CRS returns with the FIRS every year in order to avoid penalties. But how will the CRS Regulations affect you as a taxpayer? How does the FIRS intend to get taxes from the Regulations? In this article, I will discuss the implication of the CRS Regulations for Nigerian individuals and corporate taxpayers. I will also explain why they must take urgent action to ensure they do not get in trouble.

How will the CRS Regulations benefit Nigeria?

The obligations and non-compliance penalties stipulated in Nigeria's CRS Regulations are targeted at Nigerian financial institutions. Also, the information to be collected by the financial institutions is on financial accounts held by persons who are not tax resident in Nigeria. This information is collected for the benefit of the foreign tax authorities of the countries where the taxpayer is normally tax resident – i.e. Nigeria's CRS partners.

But does this mean the CRS Regulations will only benefit Nigeria's CRS partners? No. The reason the FIRS will send information to other countries is because it intends to get something in return. The CRS Regulations recognise that legislative power is jurisdictional, so no country can directly bind financial institutions in other countries to collect and remit information on the offshore accounts of its tax residents. Hence, the practical, global solution to this is for each country to help its counterparts collect information on accounts held by their counterpart's tax residents in their local financial institutions.

Nigeria's CRS exchange partners have legislation like our CRS Regulations that subject their financial institutions to similar obligations as ours. Those institutions must also perform due diligence, identify reportable accounts of persons resident in any of the jurisdiction's exchange partners (including Nigeria), and surrender the information gathered to their local tax authority. The various tax authorities will then exchange the information collected from their respective financial institutions with each other. Therefore, ultimately, the FIRS will get details of the offshore accounts of Nigerian tax residents. This is to the extent that the offshore financial accounts are domiciled with a financial institution in a country that is one of Nigeria's CRS exchange partners.

How will FIRS use the information it will receive on Nigerian residents?

The FIRS will use the information from its CRS partners to determine whether Nigerian taxes that may be applicable on the inflows (including incomes and gains) into the offshore financial accounts held by Nigerian tax residents (individuals and corporates) have been assessed and remitted by the account holders. Where taxes are due and unpaid, the FIRS will take steps to recover such taxes from the taxpayer. Where the tax in question is due to a State, I expect the FIRS to share the information with the relevant State tax authority for assessment and recovery. 

Should you be worried if you have an offshore financial account?

It depends on your circumstances. Let's consider the circumstances of three fictitious Nigerians: Omoba, Diva, and Chime.

Omoba has investments abroad. He owns property from which he earns rental income. He also has shares in foreign companies that earn him dividends (or capital gains when he sells those shares). All his foreign income is received in and remains in offshore accounts.

Diva is a famous recording artiste who earns fees for foreign performances, and royalties for the distribution of her music abroad. Diva receives her foreign earnings in offshore accounts and invest the funds abroad.

Chime is a Nigerian businessman. Chime derives all his business income from Nigeria. Periodically, he converts a portion of his business earnings into foreign currency and finds a way to lodge it into accounts outside Nigeria. This is partly to hedge against foreign exchange risks and partly to allow him fund foreign business and personal expenses abroad. 

Which of these people do you think should have concerns about the CRS?

Unless they have been fully diligent with their tax compliance in Nigeria, all three of them may have cause to worry. 

Why might they be worried?

If Nigeria has an active CRS agreement with the country where the offshore accounts are located, the Nigerian tax authorities could receive a CRS report that will disclose the income and inflows into the foreign accounts of these Nigerian tax residents.

Nigerian tax residents like Omoba and Diva that receive and keep income (such as rent, dividend, interest, royalty, commission, etc.) or capital gains offshore may be required to pay Nigerian income taxes on the income. 

Technically Nigerian residents are liable to tax on their worldwide income except in the case of interest, dividend, royalty etc brought into Nigeria through government approved channels.

The above suggests that we are likely to see a lot of disputes once the CRS kicks in, and the Nigerian authorities have access to information on the foreign accounts of Nigerian tax residents. 

In the case of persons like Chime, they may be required to explain the source of their funds and show that they have properly accounted for any Nigerian taxes that are due on the income sourced from their Nigerian businesses. 

To be clear, not everyone with an offshore financial account, who earns income or receives inflows into the account, will have an income tax obligation in Nigeria. It all depends on the circumstances. For example, the inflows may not represent income, or the income may be exempt from tax in Nigeria. In addition, any double tax treaty between Nigeria and the country where the income is earned may affect the extent to which the income will be taxed in Nigeria.

It is important to note that it is not just individual account holders that will be affected by the CRS rules. Companies incorporated in Nigeria with offshore accounts will also be affected in a similar way.


If you hold offshore financial accounts, you should take steps to check whether you have any Nigerian tax obligations arising from any income or gains that you receive into those accounts.

You will need to ensure that all outstanding tax obligations on balances in those accounts are discharged. Also, you should arrange for timely compliance with respect to future taxable incomes/gains received into those accounts, and consider if there are steps you can take to reduce your exposure to additional taxes, interests and penalties. Don't forget to seek advice from experts.

Documentation is key. It is not enough to know that no additional Nigerian taxes are due on your transactions; you must be able to prove it to the relevant tax authority (which could be the FIRS or State tax authority).  

From a tax administration perspective, the FIRS and State tax authorities must not automatically assume that inflows into the foreign financial accounts of Nigerian tax residents represent income or gain that is liable to tax in Nigeria. They must not raise arbitrary tax assessments based solely on bank account balances or inflows as we have seen them do in the past.  Taxpayers must be given the opportunity to state their case.

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.