FIRS announces one-month window for payment of foreign currency tax liabilities in Naira
The Federal Inland Revenue Service (FIRS) recently issued a Public Notice announcing a one-month window from 1 March 2022 to 31 March 2022 for taxpayers to offset outstanding foreign currency tax liabilities falling due from 1 January 2022 with Naira equivalent. The one-off concession was granted in response to the requests of taxpayers who are experiencing challenges in sourcing for foreign currencies to offset their foreign currency denominated tax liabilities.
The concession is subject to the following conditions:
- the applicable exchange rate will be the Central Bank of Nigeria’s Investors and Exporters foreign exchange rate prevailing on the date of transaction and/ or the due date for payment of the tax liability.
- the concession applies to all taxpayers except companies in the Upstream Oil & Gas sector, and covers all taxes except foreign currency tax liabilities that were due on or before 31 December 2021.
- the outstanding taxes must be paid before 31 March 2022 deadline.
- copies of the relevant transaction documents and evidence of payment of the taxes must be submitted to the office of the Executive Chairman and the local tax office of the taxpayer.
We commend the FIRS for its understanding and swift response to the foreign exchange challenges currently faced by taxpayers. Its timely action should provide a relief to the affected taxpayers to settle their foreign currency tax liabilities arising from 1 January 2022 in Naira. It is hoped that the affected taxpayers will take full advantage of the concession and ensure that they settle all outstanding liabilities before 31 March 2022 as the FIRS has indicated that there will be no further concession granted in this regard.
Meanwhile, the exception of foreign currency tax liabilities accrued to 31 December 2021 from the concession could still pose a challenge to some of the affected taxpayers as the lingering foreign currency shortage in the country dates back to the 2nd quarter of 2020 due to the COVID-induced fall in global crude oil prices. There is also no assurance that the problem will be over by end of March 2022.