The Federal Inland Revenue Service (FIRS) on Monday, 29 March 2021, issued a Public Notice to clarify the procedure for self-assessed taxpayers to apply for instalment payment of their companies' income tax (CIT), in line with Section 77 (5) of the CIT Act, Cap C21, LFN 2004 [as amended by the Finance Act, 2019 (â€œthe Actâ€)].
With three months to the filing deadline for companies with the 31 December financial year-end, the FIRS has directed taxpayers who intend to settle their CIT in instalments to apply to the Board in writing with evidence of the first instalment of the CIT payable and full payment of the Tertiary Education Tax (TET). The FIRS reiterated that the final instalment of the CIT must be paid on or before the due date of filing to avoid the enforcement of tax recovery provisions of CITA and the FIRS Establishment Act on any outstanding amount due.
The Act requires taxpayers to apply for and obtain the FIRS' approval to remit their self-assessed CIT liabilities in instalments. In this regard, the Act only requires that the application for instalment payments should be accompanied with "evidence of payment of the first instalment" of the CIT payable. There is no requirement in the Act for full payment of TET as a pre-requisite for applying to the FIRS for approval to pay the CIT in instalment contrary to the FIRS' Public Notice.
TET is a separate tax from CIT, notwithstanding that the provisions relating to the collection of CIT applies to TET. Remarkably, both the Finance Acts, 2019 and 2020 did not amend Section 2(2) of the Tertiary Education Trust Fund (Establishment, etc.) Act which provides, "that the TET shall be due and payable within 60 days after the FIRS has served notice of the assessment on a company". Hence, it is unclear why the FIRS has included the full settlement of the TET as a requirement for granting the application for payment of CIT in instalments. The FIRS may, therefore, need to revisit this requirement to ensure that it is consistent with the provisions of the extant tax laws.
In the meantime, taxpayers who do not have sufficient WHT credit notes to offset their estimated 2021 tax year CIT liabilities, but wish to settle any outstanding amount in instalments, should proactively apply to the FIRS for approval of their payment plan.
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