The Honourable Minister of Finance, Budget and National Planning (“the Minister”), Mrs. Zainab Shamsuna Ahmed, recently signed the Electronic Money Transfer Levy Regulations, 2022 (“the Regulations”). This was pursuant to her powers under Section 89A(3) of the Stamp Duties Act Cap. S8 Laws of the Federation of Nigeria, 2004 (SDA), as amended by Finance Act, 2021.
The Regulations were issued to provide guidance for the imposition, administration, collection and remittance of the Electronic Money Transfer Levy (“the Levy”) introduced by the Finance Act, 2020.
The key provisions introduced by the Regulations are as follows:
The Regulations provide for a singular and one-off levy of ₦50 on the recipient of any electronic receipts or transfers of ₦10,000 or above. For equivalent receipts or transfers carried out in other currencies, the levy will be charged at the exchange rates determined by the Central Bank of Nigeria (CBN).
Paragraph 4 of the Regulations appoints the Federal Inland Revenue Service (FIRS) as the administrator of the Levy with the responsibility to assess, collect and give an account of the Levy.
The Regulations mandate the receiving bank to collect and remit the Levy to the FIRS by the next working day after the transaction date or on such other date as prescribed by the FIRS. In addition, the receiving bank is required to deduct the Levy from the amount payable where the receiver is a walk-in customer that does not have an account with the bank.
Paragraph 6 of the Regulations mandates all banks to prepare a daily list of cancelled or reversed transactions, outlining the names of the transferee, transaction amounts, levies deducted thereon, and the amount reversed and/ or cancelled. Further, banks are required to deduct the levies collected on reversed and/ or cancelled transactions from levies collected on the following working day and return such levies to affected customers.
The Regulations require banks to prepare and render to the FIRS periodic returns of the levies collected and remitted on electronic receipts and/ or transfers of money. The returns, which will be submitted no later than 21 days after the end of each month in a medium or format approved by the FIRS, shall include the list of reversals and/ or cancellations for the relevant month.
Paragraph 8 of the Regulations requires banks to keep records of all electronic transfers on which the levies are collected for a minimum of seven years.
Paragraph 10 of the Regulations provides that any bank, which fails to collect the Levy, will be liable to a penalty of 150% of the Levy not collected. Where the bank collects the Levy but fails to remit same to the FIRS, the bank will be liable to pay the Levy plus a penalty of 50% and interest at the CBN Monetary Policy rate.
Finally, where a bank fails to render returns of the levies collected or reversed transactions, or renders incomplete or inaccurate returns to the FIRS, it shall be liable to a penalty of 10% of the value of the returns not rendered or incorrectly rendered.
Paragraph 11 defines banks as “a deposit money bank or financial institution referred to under Section 89A of the SDA and includes all banks and other financial institutions as defined under the Banks and Other Financial Institutions Act, 2020”
We commend the Minister for providing guidelines for the implementation and administration of the Levy. The requirement for the FIRS to deploy technology for the collection of the levy will help to reduce collection cost and provide reasonable assurance on the correctness of the amounts due; thereby reducing the tax gap. Most importantly, the levy will be collected in real time to minimize the incidence of tax debt that normally arises when there is a long timing difference between the collection of tax and the taxable event giving rise to the tax or levy.
However, as observed with recent Regulations issued by the Minister, some provisions of the Regulations may require revisions to ensure consistency with the extant laws and avoid unnecessary disputes with the stakeholders:
i. The requirement for banks to keep records of all electronic transfers in relation to the levy for a minimum of seven years appears contrary to the provisions of Section 375 of the Companies and Allied Matters Act, 2020 (CAMA), which requires companies to keep accounting records for not more than six years. CAMA defines accounting records to include “entries from day to day of all sums of money received and expended by the company, and the matters in respect of which the receipt and expenditure took place”. It will be difficult to argue that records of all electronic transfers and/ or receipts will not constitute accounting records in this case. It is, therefore, imperative that the provision of the Regulations be amended to align with CAMA provisions.
ii. Paragraph 10 of the Regulations introduces specific penalties and interest for non-compliance with some provisions of the Regulations that differ from that of the FIRS (Establishment) Act (FIRSEA). Specifically, Section 40 of the FIRSEA imposes a penalty of 10% and interest at CBN Monetary Policy rate of the principal amount where a taxpayer fails to deduct tax and/ or remit the tax deducted to the FIRS within the specified time. Further, Section 68 of the FIRSEA provides that where the provisions of any other law, including the SDA, are inconsistent with the FIRSEA, the provisions of the FIRSEA will prevail. Consequently, the penalty and interest imposed by the FIRSEA for non-compliance with tax deduction and remittance will supercede that introduced by the Regulations. It is, therefore, necessary to update the Regulations to ensure consistency with the extant laws.
It is indisputable that any instrument, such as Regulations, issued by the Minister or any administrative agency of government pursuant to a legislation, can only be upheld if its provisions are consistent with the provisions of that law, and cannot be used as a tool to amend, vary or alter it. Therefore, the Minister may need to review the Regulations vis-à-vis the extant provisions of the SDA, CAMA and FIRSEA to ensure consistency and avoid imposing unnecessary obligations on taxpayers.
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