In Nigeria, every financial account holder, both individual or corporate, will now be expected to obtain a self-certification form and submit it at their respective financial institutions. These institutions include banks, insurance companies, investment firms, stockbrokers, dealers, mortgage firms, assets management firms, among several others.
On Thursday, September 9, 2020, the Government of Nigeria made this announcement through its twitter handle (now deleted). It states that people holding accounts in different financial institutions are required to obtain, complete and submit the form to each one of the institutions.
According to the Nigerian government, the self-certification is in 3 categories:
- Form for entity
- For Controlling Person (Individuals having a controlling interest in a legal person, trustee, etc)
- Form for individuals
A failure to execute this form could lead to a fine or the suspension of the account.
Upon reading this, one might wonder about the need for such a form given the existence of identity services like the BVN, National ID card, driver’s licence, sim registration and several others.
Nigeria, fresh of the digital identity day, has already earmarked millions of dollars for a national digital identity project.
While this seems like another identity verification scheme, our analysis shows that the Nigerian Federal Government is only making another move to shore up tax revenue and the initiative does not seem to be for everyone.
Who is the form meant for?
The self-certification form is the Nigerian Taxman’s way of telling people and corporations to voluntarily fill any form of taxable income they might have in any country.
For the sake of clarity, the FIRS says that the form is only to be administered on non-residents with taxable income from Nigeria, and residents with taxable income outside Nigeria. When this happens, the FIRS uses the word “Tax resident” to describe these individuals.
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Do you have a foregin bank account, shares, controlling stakes, or other assets in any other country besides Nigeria? Have you earned dividends, interests on your savings, royalties, director's fees?
Or are you non-resident but with business or income from Nigeria. Then this form might concern you.
The FIRS states that the information on tax residency is expected to be made available to financial institutions during account opening, as part of the Know-your-customer (KYC) and anti-money laundering (AML) initiatives.
But who should fill it?
At first glance, it seems the relevant details needed from most Nigerians could be sourced through the BVN, a unique number that contains relevant financial information, but it appears the self-certification offers more information that cannot be gotten from the BVN.
Though the self-certification form is not meant for everyone, the government still stated that ALL ACCOUNT HOLDERS should fill the form.
If this is the case, then it seems that the Nigerian government does not have the full information on people that fall in this category, hence the announcement demanding to fill the form. If it did, then it would ask just those persons to fill the form.
If this is also the case, it is not clear why people haven’t been asked to either fill the forms online or to download it, fill, and send back a scanned copy to their respective financial institutions. This is due to the current constraints on public gatherings and efforts at social distancing,
The Nigerian government’s endgame
The government’s announcement only vaguely states why it is demanding what seems to be yet another massive verification scheme with this comment “The forms are required by the relevant financial institutions to carry out due diligence procedures in line with the Income Tax Regulations 2019.”
As requested in the tweet, we went searching for more clues from the Federal Inland Revenue Service (FIRS), there we discovered that the self-certification form is actually part of a bigger play to bring tax revenues from individuals and business entities around the globe.
The self-certification form is just one part of the FIRS’ initiative on the Automatic Exchange of Information (AEOI), a partnership it signed with 107 countries all over the world.
These countries include some of the most notable offshore investment locations such as:
- Mauritius
- The Bahamas
- Hong Kong
- Singapore
- Ireland
- Cayman Islands
- Panama
- Switzerland
- The United Arab Emirate (UAE)
- The United Kingdom
The only notable absence is the United States of America. Nigeria, Ghana, Liberia, South Africa and Morroco join Mauritius as part of the six African countries on the list.
The aim? To automatically collect financial information from individuals and/or corporations making investments, savings, or earning dividends and director fees from any of the listed countries.
The function of the AEOI is for the FIRS to receive financial details from different types of financial institutions, in over 107 countries, about non-resident individuals and corporations that are doing business in Nigeria, without having to request for it.
The same also applies to resident individuals and companies that receive income from countries outside Nigeria.
Consequently, the FIRS can effectively implement taxes on the global income of resident individuals/corporations, and the Nigerian income of non-resident individuals/corporations.
On the flip side, financial information about individuals, shareholders, and corporations in Nigeria will also be sent to these countries automatically.
Matthew Gbojunbola, Director, Tax Policy at FIRS, at an interview with Tax matters explained that the development of the Exchange of information service has been in stages.
Before now, Nigeria had to request for information on a company in say France before receiving it, then it graduated to a stage where France would send any information it has on Nigerian based companies once it notices any before an automated process that needed little human intervention.was finally employed.
In the past few years, the Nigerian Federal government has lamented the poor rates of taxation in the country. Tax to GPD ratio has been historically low, so has the tax returns from High-net-worth individuals as pointed out by Nigeria’s Vice President, Yemi Osibanjo.
With this in place, there should be more transparency, and less room for tax evasions, and money laundering activities.
The Nigerian government would be better placed to tax wealthy people and companies and rake in billions of dollars in tax revenues.
This initiative comes on the heels of other reforms by Nigeria’s tax regulator, it looks to improve taxation revenues, especially at a time when traditional revenue sources like oil have been badly hit.
However, the Nigerian government and its tax agency should also communicate all relevant details about its current initiative, for the avoidance of doubt.
The Nigerian government has apologised for the misleading tweet, but has offered no clarifications.
As at press time, the FIRS website is currently down, but we've downloaded all the forms for individuals, entities and controlling persons. We will continue updating this article as more developments unfold.
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