VAIDS: 10 Things You Should Know
VAIDS which is Voluntary Assets and Income Declaration Scheme is a tax window to help individuals and companies who are not up and doing in their tax obligation between 2011 and 2016 to normalize their tax position.
Tax evasion is a growing and serious problem among the self-employed, limited liability companies and some other not profit organizations.
Fortunately, however, the employees are not involved in tax evasion in view of the procedure of administration and collection of the Pay As You Earn.
In this article, you’ll learn 10 things you should know about Voluntary Assets and Income Declaration Scheme (VAIDS).
So, without further introduction, let’s jump in to the Question and Answer, as given by Federal Inland Revenue Service.
Q1 What is the Voluntary Assets and Income Declaration Scheme (VAIDS)?
A1 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, tax payers will benefit from the 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.
Q2 Why is the Federal Government Offering this Scheme?
A2 Nigeria’s tax system is based on global best practices. It is a progressive system that ensures fairness. Those with the highest income levels should shoulder the greatest proportion of the tax burden. Whilst considerable progress has been made with taxing those in formal employment, self-employed persons, professionals and some companies are able to evade full tax payment due to the inability of the tax authorities to assess their true income and thereby tax them accurately. According to the Joint Tax Board (JTB), as at May 2017 the total number of taxpayers in Nigeria is just 14million out of an estimated 69.9million who are economically active.
Nigeria’s tax to GDP ratio, at just 6%, is one of the lowest in the world (compared to India’s of 16%, Ghana’s of 15.9%, and South Africa’s of 27%). Most developed nations have tax to GDP ratios of between 32% and 35%.
Some of the ways in which taxes are evaded include:
. Manipulating accounting records by keeping two sets of books.
. Many states have lacked the machinery to accurately track the true income of their residents.
. Use of complex structures in transactions to evade taxes.
. Non-registration for VAT, or charging of VAT without remitting to FIRS
. Non-payment of Capital Gains Tax (CGT) on asset disposals.
Nigeria’s low tax revenues are at variance with the lifestyles of a large number of its people and with the value of assets known to be owned by Nigerians resident around the world. There has been a systemic breakdown of compliance with the tax system with various strategies used to evade tax obligations. These include but are not limited to; transfer of assets overseas, the use of offshore companies in tax havens to secure assets, and the registration of assets in nominee names. In addition, despite having some of the most profitable and well capitalized companies in Africa, the level of tax remittance is low.
Q3 Why is the Federal Government Implementing VAIDS now?
A3 Currently, there is a global initiative to tackle the problem of illicit financial flows and tax evasion which have contributed to the country’s underdevelopment. A report by former South African Premier, Thabo Mbeki found that the amount of illicit financial flows out of Africa exceeded the amount of development aid that Africa receives. Nigeria has the highest level of illicit financial flows in Africa.
As part of global support to rebuild Nigeria under President Muhammadu Buhari, the government has secured the co-operation of a number of nation state in its quest to repatriate funds due to it. Nigeria has also signed agreements with a number of nations, which provides for the Automatic Exchange of Information (AEI). This agreement allows the exchange of information between tax authorities of different countries and about financial accounts and investments to help stop tax evasion. Countries who are party to this agreement include Switzerland, Panama, The Bahamas and other tax havens. Additionally, banking information will easily be shared across countries due to newly implemented Common Reporting Standards (CRS).
In August of 2016, the Federal Executive Council FEC approved Nigeria’s participation in the country-by-country- reporting standard. This will provide tax authorities with greater transparency into the scale of multi-national company operations, and enable increased detection of profit shifting and other tax evasion strategies. In addition, Nigeria signed up for the establishment of the Beneficial Ownership Register at the Anti-Corruption Summit in London in 2016. This will give us access to the true owners of properties in the U.K and other participating countries.
Q4 How long will VAIDS last?
A4 The scheme is expected to last for nine months from July 1, 2017 to March 31, 2018. Once the scheme period has expired, there will be no renewal or extension, all remaining tax defaulters who have not taken advantage of it will face the full force of the law.
A summary of the benefits is included below:
Q5 What types of Taxes will be covered?
A5 The scheme will cover all Federal and States taxes such as Companies Income Tax, Personal Income Tax, Petroleum Profits Tax, Capital Gains Tax, Stamp Duties and Tertiary Education Tax.
Q6 Are individual taxpayers the only participants in the scheme? Can companies make declarations as well?
A6 The scheme covers all taxable persons and entities including individuals, trusts, executors, registered companies and statutory companies.
Q7 How do I pay the tax due under the Scheme?
A7 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.
Q8 Will I have to pay all the established liabilities at once?
A8 The Federal Government appreciates 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 installments. Taxpayers may, at the discretion of the relevant authority, be granted up to three years to pay their liability, but will be obligated to pay interest on the outstanding balance.
Q9 Are Nigerians liable to pay tax on oversees Income and Assets?
A9 Nigerian tax law is clear that Nigerian tax residents are liable to pay tax on their income earned anywhere in the world. Nigerian tax residents include the following:
. Individuals that derive income from sources in Nigeria;
. Employees that are in Nigerian employment or resident in Nigeria for at least 183 days within a twelve month period; and
. Nigerian companies who were incorporated or have a fixed base in Nigeria.
Q10 What about taxes I have already paid?
A10 All taxes already paid will be taken into account to determine the final tax position of a taxpayer.
Are you interested in regularizing your tax position? CLICK HERE.