Monday, December 03, 2018/06:30PM/Deloitte
The Federal Government of Nigeria, on 8 October 2018, signed a new Executive Order 008 (Order) backing the implementation of the Voluntary Offshore Assets Regularisation Scheme (VOARS or the Scheme), aimed at combating money laundering and tax evasion. The Scheme took effect from 8 October 2018 and will cover a period of twelve months.
Under VOARS, Nigerian taxpayers who hold offshore assets and generate offshore incomes are encouraged to voluntarily and truthfully declare those assets and incomes for which no prior taxes were paid and make a one-time payment of 35% on the total value of the offshore assets or undergo a forensic audit of the offshore assets and pay all outstanding taxes, including penalties and interest. In exchange for participation in the Scheme, the defaulting taxpayers will enjoy immunity from prosecution for tax offences and offences related to the offshore assets.
Defaulting Nigerian taxpayers who fail to take advantage of the Scheme will be required to undergo investigation and enforcement procedures concerning offshore assets held by them upon the expiration of the Scheme. This will be based on information obtained by the government through automatic exchange of information between Nigeria and foreign countries where the assets are located.
The Scheme is open to all persons, companies and their intermediaries holding offshore assets and are in default of their tax obligations, including those who are not already under investigation by law enforcement agencies in Nigeria or any other country and those who have not been charged with any crimes (ranging from theft of public funds to obtaining the assets through corrupt practices). The Federal Government intends to set up a VOARS in Switzerland for all categories of taxpayers who have defaulted in declaration of their offshore assets and payment of taxes due further to the terms and conditions of the Order.
It will be recalled that the Federal Government introduced a somewhat similar amnesty scheme in 2017 – Voluntary Asset and Income Declaration Scheme (VAIDS), which enjoyed large participation leading to significant increase in tax revenue, expansion of the tax net and increased voluntary compliance with tax obligations. VOARS is therefore expected to have a similar effect while also facilitating the regularisation of offshore assets connected to Nigeria.
While this is a good development, implication of VOARS on taxpayers that took advantage of the VAIDS Scheme is unclear. It is also not clear what period the assessments would cover and how far back the audits and investigations would go. We expect that the Federal Government will provide more information that will clarify these issues as soon as practicable.
In the meantime, taxpayers are advised to review the components of their offshore assets and incomes to ascertain potential tax exposures that may arise therefrom and settle any outstanding taxes or take advantage of the Scheme by making a one-time payment of 35% on the total value of the offshore assets.