FIRS waives penalty and interest on accumulated tax liabilities
Deloitte Tax Alert
The major objective of the waiver is to promote voluntary compliance and consequently generate revenue for government which otherwise, could have been lost.
The Federal Inland Revenue Service (FIRS) has issued a notice to inform the public of a special window opened for taxpayers to avoid payment of penalty and interest charges on tax due between 2013 and 2015. The major objective of the waiver is to promote voluntary compliance and consequently generate revenue for government which otherwise, could have been lost.
Highlights of the waiver include:
- It covers only accumulated penalty and interest charges and not applicable to actual/principal tax due
- The special window will be opened for 45 days only, commencing 5 October 2016 and ending 24 November 2016
- Subsequent to the window period, FIRS will deploy all legal means at its disposal on defaulting taxpayers, including criminal prosecution
To enjoy the waiver, the taxpayers must:
- Come forward to declare their indebtedness within the window period
- Apply for the waiver, in writing, to the Office of the Executive Chairman of FIRS
- Make payment on account of at least, 25% of the principal tax due, while the balance can be paid instalmentally
- Present a payment plan of the outstanding principal tax liability acceptable to FIRS
However, the notice is not clear about the following:
- Impact on on-going tax audits and investigations – Will taxpayers currently undergoing tax audits and investigations covering the relevant years be eligible to enjoy the waiver? If yes, what is the plan where the audit/investigation exercises are not concluded within the window period for determination of principal tax due?
- Impact on future tax audits – Affected taxpayers will declare their indebtedness on the basis of self-assessment. However, additional tax liabilities may arise from the same period during future tax audits. Will additional tax due from the exercise, if any, in future be subject to penalty and interest charges?
- Intent behind the relevant years – The pardon period is limited to the last three years. It may have been extended to include the last six years (i.e. years that are open for audit)
- Window period – There is discrepancy between the number of days for the special window and actual dates mentioned. There are 51 days between 5 October 2016 and 24 November 2016. Which will override – 45 days or 51 days?
We will continue to monitor developments in this space and update you as further facts become available.
In the meantime, it is imperative for taxpayers to promptly evaluate all relevant tax exposure and determine their indebtedness to FIRS to enable them enjoy the waiver within the stipulated period.