The Federal Inland Revenue Service (FIRS) has made it clear to
businesses in Nigeria that it is serious about tackling tax
Relying on some of the news reports we have gathered and experiences
of some of the affected companies, we now fairly understand what they do
before they seal off any organization.
- They give you an assessment of what you owe: Before
the tax authorities seal off your premises, they first send you a tax
assessment of what you owe. Tax assessments can be done in two ways.
It’s either they assess your tax liabilities after obtaining your
financial records, or they pass a Best of Judgement Assessment (BOJ). A
BOJ is an assessment done without relying or partly relying on your
financial records. Once an assessment is done, they send a letter to
your registered address or the most visible location of your offices.
The FIRS often gives a period of two weeks or less for response.
- They send you a demand notice: If after sending you
a notice of assessment for how much tax you likely owe, you do not
respond, they send you a demand notice. A demand notice can also be sent
if negotiations break down between you and the tax authority. A demand
notice is basically a letter of demand that you pay tax to the FIRS. The
demand notice will include the estimated tax liabilities computed
against your company, as well as any penalty or charges that may
have accrued due to your inability to pay your tax within
the required period. A demand notice, in some cases, has a one-month
period for the tax payer to respond to it.
- Seal off offices: After
the stipulated period in demand notice has elapsed and no agreement has
been reached, the tax authority will get their enforcement unit to
seal off your office premises. We have seen instances where the
enforcement unit actually sealed off offices even when negotiations were
ongoing. The order to seal off offices often comes from the FIRS HQ,
which makes it difficult for the local offices to reverse.
We often advise startups or companies to try to pay up a part of
what they feel is their tax liability once an assessment notice is
received. After making payments, follow-up with self instigated meetings
with the Inland Revenue. We also advise that you go with a qualified
and experienced tax consultant.