WHAT YOU SHOULD KNOW ABOUT NIGERIA'S VAIDS

WHAT IS VAIDS ABOUT?

On 29^th June, 2017, the then Acting President; Professor Yemi Osinbajo signed into law; a tax amnesty scheme called the Voluntary Assets and Income Declaration Scheme (VAIDS). What the scheme seeks to do in essence is to grant defaulting tax payers an opportunity to declare their untaxed income and assets in the last six years in other for it to be assessed by the tax agency and in return amount due will be paid by the tax payer devoid of any interest or penalties which usually include prosecution in Court.

WHAT DOES THE SCHEME MEAN TO THE TAX PAYER?

Ordinarily, when tax payers default in paying at due date, the sum will begin to attract interest, but with the VAIDS, all you will be paying is just the principal sum due. Tax payers can take can take advantage of the scheme between 1^st July- 31^st December 2017. This is the interest and penalty free period. From 1^st January 2018- 31^st March 2018, the sum due some will begin to attract interest but because it is a grace period, there still wouldn’t be any penalty attached.

WHAT DOES THE SCHEME MEAN TO THE GOVERNMENT?

For the government, the primary purpose is to raise revenue for the state. The decline in global oil price has forced the government to begin to look for other means to raise money for the state and what other way is better than looking inwards? The estimated revenue to be raised the government from the scheme is estimated at 1billion USD.

The second reason is to increase Nigeria’s tax to GDP ratio which is currently at 6%. This is a very low figure considering the country’s population size and perceived income. The end game is to increase this to 15%. 

The third major reason is to increase the net base of tax payers in Nigeria. There are only about 14million registered tax payers in the entire country most of which is generated from the Pay As You Earn Scheme (PAYE) and Company Income Tax. This is a small figure from an estimated 80 million people/entities that should be paying tax.

WHAT IS THE MODUS OPERANDI OF THE SCHEME?

The Scheme is being implemented by the Federal Inland Revenue Service (FIRS) in conjunction with the State Inland Revenue Services of the 36 States of the Federation. To participate, eligible tax payers are expected to make a full disclosure using the VAIDS declaration forms.

The VAIDS Individual form (VAI) inquire about your personal profile, your income; within and outside Nigeria, your tax history, your assets; movable and immovable, asset disposal (to calculate capital gains of course) and any other supplementary declarations not listed on the form.

For Corporations, the Corporate Form (VA2) is used to make the declaration. It contains sections such as business profile, Nature of business, business tax history, business income and expenditure, business assets; movable and immovable assets, investments held by the business and a separate section for relevant supplementary details.

After the forms are submitted, an assessment of the tax payable based on information provided will be carried out by the relevant tax authority i.e. the Federal Inland Revenue Service (FIRS) and State Board of Inland Revenue (SBIR).

INCENTIVES OF THE SCHEME

First, Immunity from prosecution from prior defaults. So, a tax payer who hasn’t paid tax in 5-6 years will not be facing prosecution from the tax authority. Rather, upon assessment, all that has to be paid is full liability minus interest or penalty.

Secondly, a tax payer is allowed to spread the liable cost over a period of 3 years. This sounds like the government is willing to look at your ability to pay at once and is even willing to grant you an elongated period of payment.

IS IT TOO LATE TO TAKE ADVANTAGE OF THE SCHEME?

If you haven’t made your declaration yet, time is still on your side. In fact, you still stand a chance on not paying interest on your assessed sum if you make your declaration before the end of 2017. You can visit the nearest tax office if you require more information on completing your form or simply talk to a tax professional who is equipped to properly advice you.

CAN I JUST IGNORE THE SCHEME ALTOGETHER?

As long as you are a taxable person or entity, you cannot avoid paying tax. Aside from the fact that it is illegal, it is also your civic responsibility to contribute to the funding of state operations.

Any eligible tax payer who then fails to take advantage of the scheme until expiration in March 2018 will be liable to pay in full the original tax liability plus interest and penalty.

So, no you are not allowed to simply ignore declaring your income and asset to the tax authority.

CONCLUSION

If you know you are eligible to pay tax and you haven’t been complying, now is a good opportunity to take up this amnesty program on its merits. Waiting to see if the government will indeed make any move to catch tax evaders may be dangerous both financially and punitively. Again, seek professional advice if the scope of the scheme is still not clear to you. You can also visit the Scheme’s website on www.vaids.gov.ng for further information.