Federal Government Unveils New Instalment-Based Tax Payment Plan

The Federal Government of Nigeria has introduced a new tax payment option that allows individuals to pay their taxes in instalments, as part of the Nigeria Tax Bill 2024, recently submitted to the National Assembly for approval. According to a draft of the bill obtained by a correspondent, this initiative offers taxpayers greater flexibility, enabling them to either pay their taxes in one lump sum or spread out payments over time, as long as all payments are completed before the tax filing deadline.

The bill also proposes the establishment of a special account for tax refunds, which will be managed by the Accountant-General of the Federation. This is part of broader tax reforms aimed at increasing revenue collection and enhancing the efficiency of Nigeria’s tax system. These reforms are aligned with the proposals of the Presidential Fiscal Policy and Tax Reforms Committee, chaired by Taiwo Oyedele, and include the creation of a tax tribunal and ombudsman to oversee tax-related disputes and complaints.

Additionally, the reforms would lead to the establishment of the Nigeria Revenue Service, which will take over revenue collection duties from agencies like the Nigerian Customs Service and the Nigerian Ports Authority, among others.

Section 48 of the draft bill outlines the specifics of the instalment payment structure. It states that taxpayers must make equal monthly payments, with the first instalment due by the third month of the accounting period, and the final payment must be completed by the tax filing deadline. The instalments are based on an estimated tax charge for the period, with adjustments made as necessary.

For tax refunds, the bill mandates that overpayments or excess taxes will be refunded following an audit, with the relevant tax authority having the power to set rules for this process. Refunds are to be made within 90 days, with the option of offsetting the refunded amount against future tax liabilities. The bill further specifies that dedicated accounts will be created for each type of tax refund, funded by the government.

Regarding the distribution of value-added tax (VAT) revenue, the bill proposes a 10% allocation to the Federal Government, 55% to State Governments and the Federal Capital Territory, and 35% to Local Governments. Additionally, 60% of the states’ and local governments’ share will be distributed based on the principle of derivation.