The Federal Government of Nigeria has introduced a provision in the Nigeria Tax Bill 2024 that would allow taxpayers to pay their taxes in instalments. The bill, recently submitted to the National Assembly.
This new measure offers flexibility for individuals, enabling them to either pay their taxes in one lump sum or spread payments across several instalments, provided that the full amount is settled before the filing deadline.
The bill also includes a proposal to create a special account, managed by the Accountant-General of the Federation, dedicated to tax refunds.
Comprehensive Tax Reforms
Last week, the government introduced a series of tax reforms aimed at improving revenue collection. Four new bills were sent to the National Assembly, designed to provide a legal framework for the proposals set forth by the Presidential Fiscal Policy and Tax Reforms Committee, chaired by Taiwo Oyedele.
These reforms will centralize revenue collection, creating the Nigeria Revenue Service while removing the Nigerian Customs Service, Nigerian Ports Authority, and 60 other agencies from direct collection activities. A tax tribunal and ombudsman are also proposed under the new measures.
Instalment Tax Payments
An analysis of the 160-page draft bill indicates that tax payments in instalments are a key feature aimed at improving tax compliance. Section 48 states that taxpayers can make payments in monthly instalments, with the final payment due by the filing deadline. The bill outlines that the monthly amount should be proportional to the estimated tax liability for the year.
For instance, if a company’s accounting period is less than one year, the monthly payment must reflect the tax estimated for that shorter period. The final installment is due at the time of filing the tax return and must account for any previous payments made during the accounting period.
Tax Refund Provisions
The bill also outlines a detailed process for tax refunds. After an audit by the relevant tax authority, taxpayers will be eligible for a refund of any overpaid taxes. Refunds must be processed within 90 days, or taxpayers can choose to apply the excess toward future tax liabilities.
A dedicated account will be created by the Accountant-General to manage these refunds, ensuring proper allocation of funds. State governments will also follow this structure for managing tax refund payments. However, refund claims must be submitted within six years of the related tax assessment.
Distribution of VAT Revenue
The bill proposes a new distribution formula for value-added tax (VAT) revenue: 10% will go to the Federal Government, 55% to State Governments and the Federal Capital Territory, and 35% to Local Governments. Of the amount allocated to states and local governments, 60% will be distributed based on the principle of derivation.
