In light of the recent global crisis brought about by the novel Coronavirus (COVID-19 or the Pandemic), countries around the world have put in place various measures to cushion the effects of the Pandemic. Such measures range from border closures, restriction of movement and provision of welfare packages for citizens. Apart from individuals, small companies, no doubt are also more susceptible to the uncertainty and economic downturn caused by the Pandemic. In this article, we consider the various measures introduced or proposed by the government to provide relief.
- Government loan
The Central Bank of Nigeria (CBN) has announced the following measures to assist small and medium scale enterprises (SMEs) to handle the economic fallout of the Pandemic:
- Creation of a N50 Billion Naira targeted credit facility - This would be administered through the Nigeria Incentive-Based Risk Sharing System for Agricultural Lending's Microfinance Bank for households and SMEs that have been particularly hit hard by Covid-19, including but not limited to hoteliers, airline service providers and health care merchants.
- Credit Support for Healthcare Industry - in order to address the increased pressures placed on healthcare services and products, the CBN has made available loans for pharmaceutical companies intending to expand their drug manufacturing plants in Nigeria. This loan is equally made available to hospital and healthcare practitioners who intend to expand or build first-class health Care facilities.
- Interest rate reduction - Interest rates on all applicable CBN intervention facilities are hereby reduced from 9 to 5 per cent per annum for 1 year.
- Extension of moratorium - All CBN intervention creditors are hereby granted a one year extension on all principal repayments. Furthermore, direct beneficiaries of these facilities are granted legal authorization to extend this postponement of repayment of principal loans granted under these intervention schemes for one year to the underlying debtors.
2. Extension of time to file returns and file E-returns
The Federal Inland Revenue Service (FIRS) as well as many state tax authorities have issued extensions to the statutory filings and have in some cases provided e-filing platforms. Some of such measures are:
a) Measures by FIRS
- The due date for filing Companies Income Tax (CIT) returns has been extended by one month. Notwithstanding the fact that small companies are not required to pay CIT, such companies still have CIT filing obligations. This is a welcome development for SMEs as they would not be exposed to late filing penalties should they go past the statutory due date.
- SMEs can file their CIT returns with FIRS without an audited account, provided that the audited accounts are filed within two months after the revised due date of filing.
- Timeline for payment of withholding tax and filing of value added tax returns has been extended from the 21st of every month to the last working day of the month.
- To minimize contact with FIRS, taxpayers can either submit their returns on the FIRS e-portal or via designated emails based on the categorization of such taxpayers by FIRS.
- All meetings of FIRS' staff with taxpayers are to be limited to a maximum of 10 people at any time.
- For desk reviews and tax audits, FIRS will publish information requests on its website and create a portal where requested documents can be uploaded by taxpayers.
The implication of the self-accounting rule for VAT is that there is no VAT exemption based on value of taxable supplies. The exemption enjoyed by SMEs is limited only to obligation to charge VAT and file returns. The supplies remain liable to VAT with the obligation to account for VAT, passed to the buyer.
b) Measures by State tax authorities
In response to the extreme societal disruption caused by the Pandemic in the country, certain states like Edo, Lagos and the Federal Capital Territory (Abuja) have issued notices informing the general public resident in these locations of an extension of the deadline to file their individual tax returns of claims and income, which is normally due on 31 March 2020. While Edo State extended the deadline to 30 April 2020, Lagos State and Abuja extended theirs to 31 May 2020 and 30 June 2020 respectively.
Some tax authorities have also started providing strategies for electronic filings to reduce the need to physically visit the tax office. This is a commendable initiative in light of the technological advantages inherent in making tax compliance easier especially for SMEs.
3. Economic Stimulus Bill
The House of Representatives (HoR) recently passed the Emergency Economic Stimulus Bill 2020 (The Bill). The Bill is essentially aimed at providing certain reliefs for individuals and corporate bodies to cushion the adverse effects of the economic downturn caused by the Pandemic.
Specifically, the Bill seeks to achieve the following:
- Provide temporary relief to companies and individuals to alleviate the adverse financial consequences of a slowdown in economic activities caused by COVID-19
- Protect the employment status of employees who might become unemployed due to possible retrenchment
- Provide for a moratorium on mortgage obligations for individuals
- Eliminate additional fiscal bottlenecks on the importation of certain materials, such as medical equipment, medicines etc. required for the treatment and management of COVID-19
- Cater for the general financial well-being of Nigerians pending the eradication of the Pandemic
The Bill is a welcome development as it seeks to alleviate the immediate effects of the Pandemic on the citizens of the country. It, however, raises a number of concerns which we expect to be addressed.