The Lagos State Internal Revenue Service (LIRS) has issued a public notice (“the Notice”) on the implementation of tax incentives and reliefs for taxpayers (Individuals and Businesses) in Lagos State. The Notice, which was published on 9 July 2020, conveys further palliative measures issued by the Service to ease the impact of COVID-19 pandemic on businesses and taxpayers in Lagos State.
In the Notice, LIRS restated its initial palliative of granting a 3-month extension period from 31 March 2020 to 30 June 2020 for the filing of individual annual returns (Form A). LIRS also re-emphasized that virtual meetings have been adopted as the official mode for tax audit reconciliation meetings in alignment with safety measures published by health agencies.
The following additional palliatives were provided to taxpayers:
- Instalmental payment of outstanding liabilities to ease cash-flow challenges impacting taxpayers (on a case by case basis selection)
- Penalty waivers for late payment of PAYE tax due during the lockdown period in the State (from March to May 2020)
- Waiver of penalties due on late filing of 2020 individual annual tax returns (Form A)
- Waiver of interest and penalties components of outstanding tax audit liabilities from 2009 to 2015 for taxpayers that present and adhere to a structured payment plan which terminates on/before 31 December 2020
- A tax credit grant of 20% of all cash and kind donations made for COVID-19, to the Lagos State Government by tax resident individuals, for the 2021 year of assessment (subject to a cap of 35% of tax due)
- Increasing payment channels to make tax remittance easy, simple and convenient
While the Notice is a laudable feat in tax administration during these unprecedented times, there are a number of growing concerns not addressed in the Notice. These have been summarised below:
Taxpayers will appreciate an extension of the tax rebate to all (individuals and businesses) who have duly complied with extant tax laws at the end of the current tax year considering the current cash flow challenges that many taxpayers are facing.
- The Notice focuses on conditional waiver of interests and penalties on tax liabilities for protracted audits from 2009 to 2015 tax years. This may be a plan to expedite closure of these tax audits. However, there are no considerations (in the form of a waiver of interests and penalties) to assuage the tax burdens for the most recent tax years and moreso 2020 which is adversely affected by the pandemic.
- Taxpayers will also appreciate if the timeline for PAYE tax payments is reviewed from the 10th day of the month following deduction to at least the last day of the month following deduction. This will lessen the taxpayers’ obligations and will further ease cashflow challenges on such taxpayers.
- Nevertheless, it is expected that LIRS will continue to monitor and review COVID-19 developments and know the appropriate time, to introduce additional palliative measures in response to the pandemic. We are optimistic that other state revenue authorities will adopt this same approach and offer similar palliative measures to keep afloat the productive capacity of the economy and consequently, the taxpayers.
We will continue to monitor this space and provide updates as they become available. Please click to access the Notice.