President Muhammadu Buhari on Wednesday signed an executive order directing Nigerian taxpayers to voluntarily declare and pay tax on their offshore assets.
The new executive order No. 8 is tagged Voluntary Offshore Assets Regularisation Scheme (VOARS) and went into effect same day the president signed it.
It is still being debated if such a major tax reform should come in form of an executive order or a proper law, but the government says the scheme was set up to help Nigerians to regularise income made outside the country, regularise their offshore assets and tax status, and also ascertain their outstanding tax liability.
It is similar to the Voluntary Assets and Income Declaration Scheme (VAIDS) backed by an executive order signed by Vice-President Yemi Osinbajo in June 2017—with the offshore assets component marking the only difference between both schemes.
TheCable highlights provisions of the VOARS executive order.
DEFAULTING TAXPAYERS TO BE PROSECUTED
According to the executive order, defaulters who fail to take advantage of the scheme will be investigated, prosecuted and charged to court, accordingly.
Defaulters would be liable to “pay in full, the principal sum due” on all taxable offshore assets after the grace period expires.
As against a 35 per cent one-time levy that complying taxpayers would enjoy, defaulters, will be obligated to pay 100 per cent of all interest and penalties arising from the principal sum that has accrued over the 30-year assessment period.
The order says: “Failure of any defaulting taxpayer to truthfully and promptly take advantage of this Scheme shall at the expiration of the Scheme result in… investigation, charges and enforcement procedures concerning offshore assets anywhere in the world pursuant to information now readily available through automatic exchange of information between Nigeria and foreign countries; loss of right to plea bargain; liability to pay in full, the principal sum due; liability to pay 100% of all interest and penalties arising therefrom; liability to be prosecuted in accordance with relevant existent laws for tax offences; withdrawal of any reliefs, which may have been granted to the participant and liability to undergo comprehensive tax audit.”
It also says “any sum paid in relation to the Scheme may be counted as part payment of any further outstanding tax in respect of undisclosed information”.
NO HIDING PLACE FOR TAX DEFAULTERS
Defaulters will be “easily fished out” for assessment, since there is now an automatic exchange of information between Nigeria and foreign countries, according to VOARS.
A number of criteria for participation in the programme were listed.
For example, the defaulter must not be “under investigation by law enforcement agencies in Nigeria or any other country and have not been charged with any crimes including then of public funds or obtaining offshore assets through corrupt practices”.
The defaulter may have ownership of offshore assets but are yet to declare them with the relevant authorities or may earn income on offshore assets but has not yet declared such income to relevant tax authorities.
“The scheme is open to those who are under a process of tax audit or investigation with the relevant Tax Authority, those who are engaged in a tax dispute with the relevant Tax Authority but are prepared to settle the tax dispute out of court, those who have received FGN Special Clearance to access the Scheme, and those who have been determined to be innocent after investigations or legal proceedings,” the order says.
Registered taxpayers who have additional disclosures to make, have not been filing returns or has been underpaying or under remitting, are also eligible to key into the scheme.
12-MONTH GRACE PERIOD FOR DEFAULTERS
Unlike AIDS that had a nine-month window for tax defaulters, the new VOARS will provide a 12-month window for individual, entities and intermediaries who are in default of their offshore tax liabilities to get their affairs in order.
The executive order applies to a 30-year assessment period.
“The Scheme shall provide a twelve (12) month period commencing from 2018 for taxpayers who are in default to declare their offshore assets and income from sources outside Nigeria relating to the preceding thirty (30) years of assessment,” the order reads.
35 PERCENT ONE-TIME LEVY
The order highlights how defaulters could successfully regularise their offshore assets, thereby validating the process.
Defaulters have the option to “voluntarily elect to regularise their tax status for all the relevant years by paying a one-time levy of 35% of their offshore assets in lieu of all outstanding taxes, penalties and interest.”
The 35 per cent levy will be paid to the federal government “in the manner prescribed by regulations governing the Scheme, or for those who choose forensic audit, consent that the assessment of tax payable will be carried out by the relevant Tax Authority.”
DECLARATION THROUGH SWITZERLAND INTERMEDIARY
Another option would be to regularise their tax status by accessing a specific government chosen “disclosure facility” located in Switzerland, in order to obtain an eligibility certificate.
“The disclosure must be made through the Voluntary Offshore Assets Regularization Facility in Switzerland (VOARFS), the qualified intermediary of FGN rendering services for this purpose,” the order read.
“The disclosure must be made using the disclosure pack provided by the Voluntary Offshore Assets Regularization Facility in Switzerland (VOARFS) or in any other form or manner as may be prescribed by Regulations governing the Scheme.”
‘IMMUNITY’ FOR FULL COMPLIANCE
According to the new VOARS, any taxpayer that complies with the terms outlined therein would enjoy immunity to prosecution on tax related offences and enjoy waivers on interests and penalties.
“Any taxpayer who truthfully and voluntarily declares his offshore assets and income complies with the regulations and guidelines and either pays a one-time levy of 35% on the total offshore assets or pay: all outstanding taxes, penalties and interest after forensic audit of their offshore assets and income shall obtain…immunity from prosecution for tax offences and offences related to the offshore assets, immunity from tax audit, waiver of interest and penalties, and receive an Offshore Assets Regularization Compliance Certificate,” it says.
FREEDOM TO INVEST REGULARISED ASSETS
As part of the benefits for full compliance to the provisions of the scheme, the government has said that participants who have been cleared will have free access to their assets, which can further be invested both in Nigeria and abroad.
According to the order, they will “be free to use or invest the duly regularized residual of their total offshore assets in any manner in Nigeria or overseas, and be subject only to annual tax on the income earned on such assets.”
As a caveat, however, if a court order has been given to a defaulter within the 30-year assessment period—that benefit would not apply.
“Provided however that the above-mentioned reliefs are obtained only if the remission or waiver granted under the Regulations governing the Scheme shall not prejudicially affect or invalidate any court order or judgment already obtained in respect of any default in the payment of tax for which interest and/or penalty have already accrued,” the order says.
BREACH OF CONFIDENTIALITY CLAUSE
During the duration of the scheme, no information provided by the defaulter must be made public by the recipients (tax authorities or other government officials). Any breach of confidentiality will lead to the prosecution of the guilty party.
“All information provided by the taxpayer under the Scheme shall be treated with utmost confidentiality in accordance with the provisions of the relevant laws save where it is stated otherwise,” the order says.
“Any Nigerian official or persons duly authorized to receive information under the Scheme who breaches the confidentiality of information received or exchanged under the Scheme in breach of relevant laws shall be liable to prosecution under extant laws in Nigeria.”
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