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Nigeria’s Common Reporting Standard Regulations: What You Need to Know
As Nigeria’s financial sector continues to evolve, the government has introduced new regulations aimed at improving tax compliance and reducing tax evasion. The Common Reporting Standard (CRS) Regulations, which came into effect in [year], require Nigerian financial institutions to report information on foreign financial accounts held by Nigerians.
Who Are Reportable Financial Institutions?
Reportable Financial Institutions (RFIs) are those that are obligated to make payments under an insurance contract with a cash value or under an annuity contract. This category typically includes most life and composite insurance companies. To determine if your institution is an RFI, follow these steps:
- Is it an insurance company?
- Does the institution have a cash value or annuity contract?
- Is the institution obligated to make payments under the contract?
If you answered “yes” to all three questions but are not categorized as a Non-Reporting Financial Institution (NRFI), then your institution is an RFI.
What Are Non-Reporting Financial Institutions?
NRFIs are financial institutions that are exempt from reporting requirements. These include:
- Government entities, central banks, and international organizations
- Retirement funds that meet certain criteria
- Qualified credit card issuers
- Collective investment vehicles that meet exclusion rules
- Trusts where any of the trustees is an RFI that has reported all required information
What Obligations Do RFIs Have?
RFIs are obligated to perform due diligence to identify Reportable Accounts (RAs) and collect financial account information. They must then report this information to the Federal Inland Revenue Service (FIRS) in an annual information return.
The CRS contains detailed rules on exactly what due diligence obligations RFIs have for new and existing entity and individual accounts.
Consequences of Non-Compliance
Penalties will apply if an RFI fails to meet its obligations. The regulations prescribe the following penalties:
- Failure to comply with duty/obligation imposed by the Regulations: ₦10 million in the first instance + ₦1 million/month
- Failure to file information return: ₦10 million in the first instance + ₦1 million/month
- Furnishing false or incorrect information: ₦5 million
- Failure to keep records: ₦1 million in the first instance + ₦100,000/month
What Information Will Be Collected?
Details of local financial accounts held by persons who are tax resident in a CRS participating jurisdiction will be collected by Nigerian RFIs and sent to the FIRS. The information to be collected includes:
- Account holder’s name, address, tax identification number, date and place of birth, jurisdiction of tax residence, account number, account balance
- Name and identification number of the financial institution keeping the account
- Total amount paid or credited to the account by the financial institution
How Will It Affect Nigerian Tax Residents with Offshore Accounts?
The FIRS will share this information with the tax authority of the participating jurisdiction in which the account is held. This means that Nigerian tax residents who have offshore accounts will need to provide this information to the FIRS.
Conclusion
The CRS Regulations are a significant development for Nigeria’s financial sector. RFIs must take steps to understand their obligations and discharge them timeously, accurately, and efficiently. Failure to do so can lead to penalties, embarrassed clients, and reputational damage. The FIRS must also ensure that reported information is handled with utmost confidentiality and that its IT infrastructure is secure.
About PwC
PricewaterhouseCoopers (PwC) is a network of firms in 157 countries with more than 276,000 people who are committed to delivering quality assurance, advisory, and tax services. Find out more by visiting us at www.pwc.com/ng.