As the new policy on tax, the Tax Identification Number, TIN, came into effect last week, bank depositors have flooded banks to withdraw their savings.
This is following the signing of the Finance Bill into law by President Muhammadu Buhari.
ATM galleries and banking halls of most banks were quite full last week as depositors ensured that they were not caught unaware.
SEE ALSO: 7.5% VAT takes effect February 1 as FG inaugurates FIRS board
There were conflicting signals from the government last week as the Minister of Finance, Mrs. Zainab Ahmed and the Accountant General of the Federation Mr. Ahmed Idris held different positions on the implementation. While Ahmed said that the implementation will be begin after further discussion and selective, Idris insisted that the law has taken effect and will be implemented immediately. By weekend, the 7.5 percent VAT was already being implemented.
It would be recalled that the finance bill, which seeks an amendment of Nigeria’s tax laws, was presented by President Muhammadu Buhari alongside the 2020 Appropriation Bill to a joint session of the National Assembly on 8 October 2019; it was subsequently passed by both the Senate and the House of Representatives in December 2019.
The passed bill, which was signed last week by the president, specifically seeks to amend Nigeria’s tax provisions and make them more responsive to the tax policies of the Federal Government, among other things.
Some of the important changes in the Finance Act are: Excess dividend tax to apply only to untaxed distributions other than profits specifically exempted from tax and franked investment income; small businesses with turnover less than N25m to be exempted from Companies Income Tax; a lower CIT rate of 20% to apply to medium-sized companies with turnover between N25m and N100m; commencement and cessation rules modified to eliminate overlaps and gaps to avoid double taxation and complication during commencement and minimum tax provisions amended to 0.5% of turnover and exemption only applies to small companies (less than 25m turnover), so non-resident companies will now pay minimum tax.
Others are: Insurance companies can now carry forward tax losses indefinitely, deduct reserve for unexpired risks on time apportionment bases while special minimum tax for insurance has been abolished; bonus of 2% of tax payable (medium-sized companies) and 1% for large companies for early payment of CIT.
Any expense incurred to earn exempt income now specifically disallowed as a deduction against other taxable income; dividend distributed from petroleum profits now to attract 10% withholding tax; email correspondences to be recognised for communicating with tax authorities; introduction of VAT reverse charge on imported services; VAT increased from 5% to 7.5%; VAT registration threshold of N25 million turnover in a calendar year to be introduced. Remittance of VAT now to be on cash basis, that is, difference between output VAT collected and input VAT paid in the preceding month; stamp duty on bank transfer to apply only on amount from N10,000 and above and banks to request for Tax Identification Number (TIN) before opening business bank accounts for individuals, while existing account holders must provide their TIN to continue operating their accounts.
Meanwhile, in spite of the many amendments and provisions in the new bill, two of the amendment that appear to have caught the interest of many Nigerians are the provision that henceforth, individuals would be required to produce their Tax Identification Numbers (TINs) before they can operate new or existing bank accounts in Nigeria, as well as the rise in VAT from 5% to 7.5%.
While speaking in December 2019, the Minister of Finance, Mrs. Zainab Ahmed, said the bill when signed into law will take effect from the 2nd of Jan 2020. However, the controversy that trailed the passing of the bill had stalled its signing by the president. It was later signed into law despite some objections raised by some Nigerians against it.
Business Hallmark learnt over the weekend that the Central Bank of Nigeria (CBN) might compel all commercial banks to implement the requirement for them to obtain tax identification number (TIN) from customers. Banks would be now required to obtain TIN from corporate customers as a pre-condition for opening or maintaining bank accounts.
Some Nigerians who spoke out voiced the concern that their accounts could be frozen and eventually seized by the government if they failed to produce their TIN. While some said they will go ahead to obtain their TINs from their state internal revenue service, others disclosed that they might be forced to withdraw their funds from their banks before the hammer falls.
SEE ALSO: Finance law: Confusion hovers
“Why would they do that? I am just a small time trader. What do they mean by TIN? They first came with BVN and now with TIN. They should just leave us alone to live our lives. Every day, I pay N500 to the agberos at the park where I trade. I pay security fees, pay local government council officials. At the end of the day, I hardly go home with N1, 500. And they still want to collect that from me”, lamented Mrs. Olabisi Adebolu, a trader at the Agege/Pen Cinema Motor Park.
However, an economist and finance professional Mr. Yinka Ogunnubi, allayed the fears of Nigerians who are scared of the consequences of the new bill.
“TIN is a requirement of every taxable individual in Nigeria. A taxable individual is anyone that earns an income and/or is paid an income by an organisation irrespective of age. This includes foreigners working in Nigeria as well.
“TIN doesn’t take away your tax relief or exemptions. It is just a confirmation of registration of the individual for tax purposes. The TIN only confirms that you are a registered tax payer in Nigeria, it is not a deduction of tax from source nor does it confer on you any accreditation that you have paid your tax,” he explained.
Speaking on how the implementation of the new Act will affect Nigerians, Ogunnubi said there is the likelihood that banks will start asking customers to provide their TIN from the date the law comes into effect.
“This has the potential of disrupting the normal flow of business activities as we can imagine that bank ATM cards of those who have not compiled will not work and withdrawals or deposits can’t be made.
“In other not to shut down the system, there’s likely to be a grace period that will be given to allow individuals to obtain the TIN. How long this grace period would be is any one’s guess.
“But if you have a bank account, it is important that you pay attention and ensure you are ready and not caught off-guard. It must however be stated that this will not be an issue for Corporate Accounts because the provision of TIN is already a mandatory requirement for operating Corporate Accounts”, he said.
He allayed the fears of employees and consultants, explaining that employees of organisations that remit PAYE already have some form of tax identification from the State Internal Revenue Service.
On consultants, he said: “If you are a consultant and you have done business with government or any organisation where WHT (withholding tax) was deducted, then it means you must have at some point provided a TIN because the system now is automated. What they should do is to make efforts to verify their number to be sure it is still valid”, Ogunnubi said.
He however advised Nigerians that are self-employed or live in the diaspora to immediately obtain their TIN as they will still be required to obtain it.
Meanwhile, contrary to fears by some customers that failure to TINs would result in automatic lost of the accounts and savings, they have been advised not to panic as they would not lose their savings and accounts with their banks.
One of the customer service representatives of a 1st-tier bank on Oba Ogunusi Road, Ojodu/Berger, Lagos, who would not want his name in print since he was not authorized to speak on it, assured customers that there was no need to panic.
According to him, no accounts will be blocked permanently, but customers might be denied access to their monies until they settle tax notices issued by appropriate tax authorities after the evaluation of their statements of account over a period of time.
Source: Business Hallmark
