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Nigeria: Taxpayers will have 15 days, for withholding tax reconciliation

Nigeria: FIRS notice, withholding tax reconciliation

The Federal Inland Revenue Service (FIRS) has started issuing notices, for business taxpayers to reconcile their unused withholding tax credit balances within 15 days of receiving the notice.

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For this purpose, taxpayers are required to submit their unused withholding tax credit notes to FIRS for confirmation, reconciliation, and approval. Failure to regularise a withholding tax credit position within the 15-day period would be construed as acceptance of the tax administration’s position and thereby foreclose any possible future reconciliation.

Goal for withholding tax reconciliations

The FIRS initiative is intended to culminate in the transfer of taxpayers’ agreed withholding tax credit balances to their online accounts on the FIRS portal and to enable taxpayers to use their outstanding withholding tax credits effortlessly when filing future corporate income tax returns. The goal is to eliminate inefficiencies of the current regime whereby taxpayers are required to submit their withholding tax credit notes (issued by FIRS) to the tax administration for verification before the credits can be used. 

KPMG observation

The 15-day window may present challenges for taxpayers. Also, an issue that may arise is the possible gap between a taxpayer’s withholding tax receivable position (based on the withholding tax “deducted” by the taxpayer’s customers) and the withholding tax credit notes that the taxpayer may have actually collected from FIRS (from their customers) over the years. This gap may be due to a variety of factors such as non-remittance to FIRS of withholding tax “deducted” by customers; delayed issuance of withholding tax credit notes (especially foreign currency denominated credit notes) by FIRS; non-issuance of withholding tax credit notes by FIRS in respect of withholding tax liabilities settled during tax audit exercises; and loss of credit notes in transit.

Given these challenges, prudent taxpayers would timely review their records, collate their unused withholding tax credit notes, communicate with their customers to update their records as necessary, and meet with FIRS agents to reconcile the records.  

 

Read an August 2018 report [PDF 101 KB] prepared by the KPMG member firm in Nigeria

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