Executive summary

Nigeria’s President, Muhammadu Buhari, has signed a new Executive Order (008) for the introduction of the Voluntary Offshore Assets Regularization Scheme (VOARS or the Scheme). The VOARS requires Nigerian taxpayers who hold offshore assets and income for which no taxes have been paid, to voluntarily disclose and regularize the payment of the tax on these assets.

The Scheme, effective as of 8 October 2018, will run for a 12-month period and is open to all persons, entities, and their intermediaries holding offshore assets and are in default of their tax obligations in any way, including those who are not already under investigation by law enforcement agencies in Nigeria or any other country and have not been charged with any crimes including theft of public funds or obtaining offshore assets through corrupt practices.

Taxpayers that apply for the VOARS shall obtain immunity from prosecution for tax offenses and offenses related to offshore assets, among others. However, defaulting taxpayers that fail to take advantage of the VOARS shall, at the expiration of the scheme be subject to investigation and enforcement procedures concerning offshore assets anywhere in the world pursuant to information now readily available through the automatic exchange of information between Nigeria and foreign countries.

Detailed discussion

The Executive Order for the VOARS, which takes effect from 8 October 2018, aims to bring undisclosed income/assets from all sources outside Nigeria within the reach of the Nigerian tax authorities. The Scheme will be administered by Nigeria’s Office of the Attorney-General and the Minister of Justice in Switzerland.

The Scheme, based on the signed Executive Order provides an opportunity for eligible taxpayers to:

a. Regularize their offshore assets held anywhere in the world for the relevant years by voluntarily paying to the Federal Government of Nigeria (FGN) a one-time levy of 35% of their offshore assets in lieu of all outstanding taxes, penalties, and interests.

b. Elect voluntarily to access the facility in Switzerland by paying the 2% facility access fees and submitting to compliance procedures by Swiss authorities in order to obtain an Eligibility certificate to declare offshore assets through the Scheme.

c. Establish a Swiss nexus for their offshore assets held anywhere else in the world or its management in Switzerland or through its financial system and institutions in order to use the Scheme.

d. Avoid and stop tax evasion.

e. Ensure full tax compliance on their residual offshore assets after accessing the Scheme by paying taxes to the FGN on income earned thereon.

Other details of the Scheme include:

Eligibility to participate and requirements for valid participation

The Scheme is open to all taxpayers and targeted at persons, entities and their intermediaries who hold offshore assets and are in default of their tax liabilities in any way whatsoever. Taxpayers eligible for the Scheme include taxpayers that:

• Are not under investigation in Nigeria or outside Nigeria for any crime
• Own offshore assets but are yet to declare them with the relevant authorities
• Have undisclosed earned income from offshore assets
• Have additional disclosures to make or have not been filing tax returns
• Have been under disclosing taxable income and offshore assets
• Have been underpaying or under-remitting taxes
• Are currently under audit or investigation but ready to settle the disputes out of court
• Have received FGN Special Clearance to access the Scheme
• Are deemed to be innocent after investigations or legal proceedings

In order for participation in the VOARS to be valid, the Order specifies that the disclosure should be voluntary, honest, complete and verifiable in all material respect. Disclosures should be made through the Voluntary Offshore Assets Regularization Facility in Switzerland (VOARFS), and in accordance with compliance procedures required by the VOARFS or in any other manner prescribed by the Regulations governing the Scheme.

A valid declaration means that the taxpayer consents that a one-time levy of 35% of the offshore assets will be paid to the FGN in the manner prescribed by the regulations governing the Scheme and that assessment of future taxes payable will be carried out by relevant tax authority on income from residual offshore assets.

Benefits of the VOARS

Taxpayers that truthfully and voluntarily comply with the regulations and guidelines governing the Scheme will enjoy the following benefits:

a. Permanent waiver of criminal prosecution for tax offenses and offenses related to the offshore assets, penalties and interests concerning such declared offshore assets

b. Immunity from tax audit of the declared and regularized offshore assets

c. Receipt of an Offshore Assets Regularization Compliance Certificate on the declared and regularized offshore assets from the FGN

d. Right to use or invest duly regularized residual offshore assets in any manner in Nigeria or overseas, and be subject only to annual tax to FGN on the income earned on such residual offshore assets

However, the benefits of the Scheme will not invalidate any court order or judgment already obtained in respect of any default in the payment of tax for which interest and/or penalties have already accrued.

Non-compliance and penalties

Defaulting taxpayers that do not take advantage of the Scheme shall at the end of the VOARS be subject to:

a. Investigations, charges and enforcement procedures concerning offshore assets held anywhere in the world pursuant to information now readily available through automatic exchange of information between Nigeria and foreign countries

b. Loss of the right to plea bargain

c. Liability to pay in full, the principal sum due, 100% of all interest and penalties arising therefrom

d. Liability to be prosecuted in accordance with relevant existing laws for tax offenses

e. Withdrawal of any reliefs, which may have been granted

f. Liability to undergo comprehensive tax audit

g. Any sum paid in relation to the Scheme may be counted as part payment of any further outstanding tax in respect of undisclosed information

Implications

The launch of the VOARS in addition to the various multilateral competent authority agreement on automatic exchange of financial information already entered into by Nigeria will have far-reaching effect on tax compliance enforcement in Nigeria. It is expected that this Scheme should have a large participation similar to the Voluntary Asset and Income Declaration Scheme (VAIDS) set up by the Federal Government in 2017.

While not all taxpayers may be immediately affected, the wide covering eligibility scope of the Scheme indicates that taxpayers should perform internal checks to review the components of their offshore assets and income and confirm that they are not at default either by under-disclosing, underpaying or under-remitting taxable income and taxes due to the relevant tax authorities.

The 12-month duration of the VOARS should provide taxpayers with enough time to comply and take advantage of the Scheme as it is expected that the implementation of the Scheme will bring to the purview of the Nigerian tax authorities previously unavailable financial information of taxpayers.

For additional information with respect to this Alert, please contact the following:

Ernst & Young Nigeria, Lagos

• Abass Adeniji | abass.adeniji@ng.ey.com
• Akinbiyi Abudu | akinbiyi.abudu@ng.ey.com
• Temitope Samagbeyi | temitope.samagbeyi@ng.ey.com
• Chinyere Ike | chinyere.ike@ng.ey.com
• Zion Athora | zion.athora@ng.ey.com
• Oluwatumininu Familusi | oluwatumininu.familusi@ng.ey.com
• Ehizele Dean Okoduwa | ehizele.d.okoduwa@ng.ey.com

Ernst & Young Advisory Services (Pty) Ltd., Africa ITS Leader, Johannesburg

• Marius Leivestad | marius.leivestad@za.ey.com

Ernst & Young LLP (United Kingdom), Pan African Tax Desk, London

• Rendani Neluvhalani | rendani.mabel.neluvhalani@uk.ey.com
• Byron Thomas | bthomas4@uk.ey.com

Ernst & Young LLP, Pan African Tax Desk, New York

• Dele A. Olaogun | dele.olaogun@ey.com 

ATTACHMENT