A few hours ago, the Federal Government, through one of its twitter handles, ordered all persons holding accounts across financial institutions and insurance firms to complete and submit Self-certification forms.
Well, this was what the information sounded like, that was not what the announcement was trying to say, little wonder why the post has been taken down.
Today, the Federal Inland Revenue Service FIRS came online to clarify the statement. Still, between the use of Jargon and abbreviations, the information was less precise than the initial information posted.
In this write-up, we seek to break it down a little to know persons directly affected by the regulation and its implications.
Let me start by asking this, “What do you do as a tax authority if you suspect that tax residents of your country have taxable gains or incomes stashed away offshore?” You find a way to locate the stash and tax it. And this is what the FIRS is trying to do.
In the FIRS tweet, three concepts were mentioned, and they are vital to understanding the regulation; They are:
1. Common Reporting Standard
2. Reportable persons
3. Reporting Financial institutions
Explaining these terms is the first step in unraveling the mystery.
Common Reporting Standard: CRS is a set of rules guiding the automatic exchange of financial account information between the tax authorities of countries that have opted for the CRS regulation.
Reportable person: A reportable person is usually a foreign person (natural or legal) resident in Nigeria. However, a Nigerian person (natural or legal) who has foreign branches or subsidiaries in any reporting financial institution is also a reportable person. A Reporting account refers to the account of a reporting person in a reporting financial institution.
Reporting Financial Institutions: Broadly speaking, financial institutions such as banks, insurance companies, asset/portfolio managers, and investment funds/trusts have reporting obligations under the CRS. However, some financial institutions are categorized as Non-Reporting Financial Institutions (NRFIs).
NRFIs are as follows:
– Government entities, central banks, and international organizations, and their pension funds.
– Retirement funds such as Pension Fund Administrators that meet specific criteria.
– Qualified credit card issuers.
– Collective investment vehicles that meet particular exclusion rules.
– Trusts where the trustees have reported all required information regarding the trust.
– Other low-risk Financial Institutions as may be designated by FIRS.
That being said, what are the obligations of the Reporting Financial Institutions?
The RFIs are obligated to perform due diligence by:
(i) identifying Reportable Accounts (RAs), defined broadly as accounts held by tax residents of any jurisdiction with which Nigeria has a CRS exchange relationship;
(ii) Collecting the financial account information indicated above.
(iii) Report the collected data to the FIRS in an annual information return due on 31 March of the year succeeding the year to which the information relates.
In my opinion, the government is just trying to use its powers to assist the financial institutions in identifying and collecting information from a reportable account to expedite the process.
If you’re not a reportable person as defined above or don’t work for a Reporting Financial Institution, you have minimal engagement with the above mentioned CRS regulation, meaning the information doesn’t concern you.