Nigeria’s tax agency—the Federal Inland Revenue Service (FIRS)—is placing restrictions on taxpayers’ use of withholding tax credit notes to settle a company’s income tax liability, by limiting the ability to carry forward withholding credit notes to those liabilities relating to the basis period for the relevant tax year.
In a particular instance, a letter from FIRS to the taxpayer states that the company can only use withholding tax credit notes relating to its 2015 financial year to settle its 2016 income tax liability—and not any withholding tax credits brought forward from prior fiscal years.
According to the FIRS, the transfer of withholding tax credit notes from one tax year to another will be treated as a tax refund. As such, the FIRS intends to conduct special withholding tax audits of those taxpayers that intend to carry forward withholding tax credits before such credit transfers can be approved.
Tax professionals in Nigeria question the FIRS position concerning the treatment of withholding tax credit notes because the policy appears to deprive taxpayers of certain statutory rights—specifically, the right to elect to receive a cash refund, or the right to apply withholding tax credit notes pursuant to established measures under the tax law. Some believe that the the tax authorities will eventually reverse this policy.
Read an August 2016 report [PDF 75 KB] prepared by the KPMG member firm in Nigeria: FIRS restricts taxpayers from carrying forward withholding tax credits
The KPMG logo and name are trademarks of KPMG International. KPMG International is a Swiss cooperative that serves as a coordinating entity for a network of independent member firms. KPMG International provides no audit or other client services. Such services are provided solely by member firms in their respective geographic areas. KPMG International and its member firms are legally distinct and separate entities. They are not and nothing contained herein shall be construed to place these entities in the relationship of parents, subsidiaries, agents, partners, or joint venturers. No member firm has any authority (actual, apparent, implied or otherwise) to obligate or bind KPMG International or any member firm in any manner whatsoever. The information contained in herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's Federal Tax Legislative and Regulatory Services Group at: + 1 202 533 4366, 1801 K Street NW, Washington, DC 20006.