VAIDS Made Simple for Tax Professionals and Tax Payers

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The then Acting President, Professor Yemi Osinbajo, SAN, GCON established the Voluntary Assets and Income Declaration Scheme (” VAIDS ” or the “Scheme”) vide the Executive Order No. 004 of 2017 (the “Order”).

VAIDS is a time-limited opportunity for taxpayers to regularize their tax status relating to previous tax periods. In exchange for fully and honestly declaring previously undisclosed assets and income, taxpayers will benefit from forgiveness of overdue interest and penalties, and the assurance that they will not face criminal prosecution for tax offences or be subject to tax investigations. VAIDS ushers in an opportunity to increase the nation’s general tax awareness and compliance.

The Scheme is expected to run for a period of nine (9) months from 01 July 2017 to 31 March 2018.

The Legal Framework for VAIDS
Section 23(2) of the Companies Income Tax Act LFN 2004 (“CITA”), as amended, provides that “The President may exempt by Order, any company or class of companies from all or any of the provisions of this Act, or from tax all or any profits of any company or class of companies from any source“.

CITA further provides in Section 89 that “The President may remit, wholly or in part any tax payable by any company if he is satisfied that it will be just and equitable to do so“.

Section 32(3) of the Federal Inland Revenue (Establishment) Act 2007 (“FIRS Act”), Section 85(3) of CITA and Section 46(3) of the Petroleum Income Tax Act Cap 354 LFN, 1990 (“PeITA”), allows the Board of the FIRS to “…for any good cause shown, remit the whole or any part…” of the interest and penalty that may be due in respect of tax liabilities of a taxpayer.

Section 79 of the Personal Income Tax Act Cap p8 LFN, 2004 (“PITA”), as amended, empowers 36 State Boards of Internal Revenue Service and FIRS in FCT, Abuja to “remit either before or after judgment the whole or any part of the penalty due under section 76 of this Act“. Section 80 of the same Act provides that the “Governor of the State may, on the recommendation of the Commissioner responsible for finance acting on the advice of the relevant tax authority, remit wholly or in part, any tax payable under this Act if satisfied that it is just and equitable so to do”.

Similarly, the Stamp Duties Act Cap 441 LFN, 1990 provides in section 113(1) that  “The President or Governor, as the case may be, may in his discretion mitigate any fine or penalty or debt due to the Government of the Federation under this Act…“.

It should be noted that “remit” as used in all of these sections means the same as “cancel”, “set side”, “repeal”, “rescind”, “abrogate”, “suspend”, etc.

Benefits of the Scheme
Tax evasion is a crime punishable, upon conviction, by imprisonment of up to 5 years, while the taxpayer will still be required to pay the tax due along with the associated interest and penalties – Part VI of FIRS Act, Part XI of PITA, Part XIII of CITA, Part X of PeITA, and Part V of the Value Added Tax Act 1993 No. 102, 1993. Typically, a penalty of 10% of the tax due is assessed, along with related interest charges that accrue at 21% per annum, commencing from the due date of the related tax charge. In some cases, the penalty assessed is 100% of the tax due and further, the related assets are liable to be forfeited. Those taking advantage of the Scheme by declaring honestly and fully will be free from prosecution and will qualify for the forgiveness of penalties and interest. Interest forgiveness will lapse by 31 December 2017.

Another benefit of participating in the Scheme is that tax payers will be able to transfer assets that they had previously held by nominees into their own name. It should be remembered that many Nigerians have lost assets in the course of trying to conceal them from the authorities. Such losses typically occur in the event of death or an urgent need to liquidate assets when required documentation and proof of ownership cannot be provided. The global focus on illicit financial flows is such that global regulations will only become tighter with time, thus this opportunity to regularise should be seized. Declaration allows assets to be legally and formally held by the true owner.

Taxes Covered by the Scheme
The Scheme will cover all Federal and State taxes such as:

  • Companies Income Tax (Including Withholding Tax)
  • Personal Income Tax (Including Withholding Tax)
  • Petroleum Profits Tax (Including Withholding Tax)
  • Capital Gains Tax
  • Stamp Duties
  • Value Added Tax
  • Tertiary Education Tax

Period of Default Covered by the Scheme
The statute of limitations for a tax investigation for honest returns is limited to six (6) years. However, there is no limit where a fraudulent return has been submitted. A condition of VAIDS is that tax payers will declare voluntarily, fully, frankly, completely, and verifiably – section 5a & 5b of the Order.

Participation in the Scheme
VAIDS is open to all persons (individuals and companies) who are in default on their tax liabilities. The Scheme is specifically targeted at taxpayers who:

  • have not been fully declaring their taxable income/assets (within and outside Nigeria)
  • have not been paying the tax due at all and or
  • have been underpaying or under remitting

Payment of Tax due under the Scheme
All taxes paid under the Scheme are to be collected by the relevant tax authorities including the FIRS and SBIRS, depending on the type of tax in issue. Payments should be made to the Relevant Tax Authority quoting your full name and TIN as a reference. The bank will issue a receipt for the payment.

Provision for Payment of Taxes in Instalments
The Federal Government understands that many defaulters have assets but may not have cash. Therefore taxpayers will be allowed to enter into arrangements to pay outstanding tax liabilities in instalments. Taxpayers may, at the discretion of the relevant authority, be granted up to three (3) years to pay their liability, but will be obligated to pay interest on the outstanding balance.

Assessment of Taxes Due
Once you register for VAIDS by filing the Declaration form, agents of the Relevant Tax Authority can help you to calculate your tax liability. You may also engage the services of tax professionals to assist in the calculation of estimated tax liabilities. Only the relevant tax authority has the authority to assess tax liabilities of tax payers based on information provided in the declaration form (provided this is done fully, completely and honestly) and in line with the relevant provisions of the law.

Tax Payer’s Obligations Post-VAIDS
Taxpayers will be expected to remain fully compliant with tax laws following the Scheme, failing which, they may be forced to forfeit the tax forgiveness granted under VAIDS and be liable to pay past liabilities in full.

First-Time Tax Payers
Registration for a Tax Identification Number would be the first step for persons who have never paid tax. TIN would be auto-generated for users using the online declaration form. For those using the paper declaration form, your application for a TIN will be fast-tracked.

Non-Resident Tax Payers
The Scheme is open to all those who were liable to tax in Nigeria. It covers Nigerian residents who had taxable undeclared income outside Nigeria and non–residents who earned undeclared income derived from or accruing within Nigeria. Those who are resident outside of Nigeria are encouraged to make an online declaration or to appoint a local agent to make the necessary declaration on their behalf.

Confidentiality of Information provided under VAIDS
The confidentiality of the information you provide under the Scheme is assured. Measures have been put in place for information received by the tax authority to be kept in strict confidence, and will not be disclosed to third parties other than in compliance with extant provisions of relevant laws – section 9 of the Order.

VAIDS Compliance Process

  • For Corporate Tax Payers

I recommend you get the services of a tax professional to assist with this process. However, depending on the volume of the company’s transactions, you may also do it yourself. If you want to do it yourself, please download the Guidance Notes for corporate tax payers > Form VA2 Completion Guidance Notes < and read it before continuing the process.

  1. Click on Register an Account to register on VAIDS and fill the declaration form (VA2) for corporate entities;
  2. For those using the manual process, please download the form here > VAIDS Corporate Declaration Form – VA2 <;
  3. Print out the completed form (for online users) and visit the FIRS office closest to the location of your company, along with all relevant supporting documents you may wish to provide;
  4. The officials at FIRS will check the information you have provided against the information they have on your company, if they are satisfied that you have declared fully and honestly, they would raise an assessment of your tax liabilities for the relevant years;
  5. If you have no objection to the assessment, you can go ahead to make payment for the full assessment or you may wish to request for payment in instalments; and
  6. Upon completion of the payments, you may apply to VAIDS for the Certificate of Compliance with VAIDS; and to the relevant tax authority for Tax Clearance Certificate.
  • For Individual Tax Payers

I recommend you get the services of a tax professional to assist with this process. However, depending on the net-worth of the tax payer concerned, you may also do it yourself. If you want to do it yourself, please download the Guidance Notes for individual tax payers > Form VA1 Completion Guidance Notes < and read it before continuing the process.

  1. Click on Register an Account to register on VAIDS and fill the declaration form (VA1) for individuals;
  2. For those using the manual process, please download the form here > VAIDS Individual Declaration Form – VA1 <;
  3. Print out the completed form (for online users) and visit the SBIRS office closest to the location of your primary residence, along with all relevant supporting documents you may wish to provide;
  4. The officials at SBIRS will check the information you have provided against the information they have on you, if they are satisfied that you have declared fully and honestly, they would raise an assessment of your tax liabilities for the relevant years;
  5. If you have no objection to the assessment, you can go ahead to make payment for the full assessment or you may wish to request for payment in instalments; and
  6. Upon completion of the payments, you may apply to VAIDS for the Certificate of Compliance with VAIDS; and to the relevant tax authority for Tax Clearance Certificate.

Please note that VAIDS does not provide any guidance as to what will happen in the event that a tax payer does not agree with the assessment made by the relevant tax authority under VAIDS. However, in the absence of the Guidance, it is safe to assume that the general provisions of tax laws regarding the rights of tax payers to object to any tax assessment will apply.

All comments or questions relating to the content of this post should be sent to info@lpps.com.ng.

References

  1. Companies Income Tax Act LFN 2004
  2. Federal Inland Revenue (Establishment) Act 2007
  3. Petroleum Income Tax Act Cap 354 LFN, 1990
  4. Personal Income Tax Act Cap p8 LFN, 2004
  5. Value Added Tax Act 1993 No. 102, 1993
  6. Stamp Duties Act Cap 441 LFN, 1990
  7. Executive Order No. 004 of 2017
  8. VAIDS Frequently Asked Questions

 

Written by Victor Osolake, ACTI, ACA

 

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