The Federal Inland Revenue Service (FIRS) has technically suspended the controversial insurance tax law, which over the years has remained a burden on underwriters.
The Partner and Head, Tax Regulatory & People Services, Wole Obayomi, disclosed this today at the VAID Scheme Awareness Lecture, organised by the Chartered Insurance Institute of Nigeria (CIIN) in Lagos.
According to him, the Chairman, FIRS, Babatunde Fowler, had mandated staff of FIRS to halt the implementation of the sections of the controversial law which the insurance industry over the years has being engaging the FIRS on how to amend sections of the tax law that placed huge tax burden on insurance companies.
President, CIIN, Mrs. Funmi Babington-Ashaye, said essence of the lecture is to create awareness amongst CIIN’s stakeholders, such that defaulters can leverage the opportunity to make it up to government by paying their tax obligations.
She added that penalties for not taking advantage of this window for those that will be caught will be very severe. It is therefore important that we spread the word to encourage more tax compliance.
“What the government has done with the VAID Scheme, therefore, is to provide a window for all tax defaulters or evaders to voluntarily declare their hidden or previously undeclared assets and income over which they have not paid taxes so that they can be appropriately taxed.
“In taking this decision, the government wants to forgive their previous sins of not paying taxes, as well as waive the associated sanctions. It is more like a tax amnesty. The window which was opened on July 1, 2017 for 9 months will close on March 31, 2018. The message is very simple, declare previously undeclared assets and income, pay appropriate taxes on them and you are good to go,” she said.
In the controversial law, some sections compelled insurance companies to pay out their capital in the form of a minimum tax because they are almost always in a never-ending refund cycle with the tax authorities.
Originally, the CITA was meant to amend and simplify controversial aspects in its policy, instead it has made it more obscure, particularly for the insurance sector.
In Section 16(2)(a) of the CITA, the profits of a life business insurance company are calculated by taking management expenses, including commission, subject to subsection (8)(b) of the Act from gross income.
For non-life businesses, section 16(1)(b) states that profits will be calculated for tax purposes by deducting the reinsurance cost and a reserve for unexpired risk, subject to subsection (8)(a) of the Act from a gross premium, interest and other income receivable in Nigeria.