Stakeholders Examine Taxation of Expatriates at 2019 Hybrid Solicitors Annual Lecture
The issue around expatriate taxation cannot be better discussed than now, that the Federal Government is making efforts to encourage and attract foreign investments, which of course include migration of expatriates to Nigeria.
This was the remark of the Managing Partner of Hybrid Solicitors , Mr. Bimbo Atilola, at 2019 Annual Lecture and Luncheon of Hybrid Solicitors and Consult held in Lagos, last Tuesday.
The Lecture, which was the 8th in the series, took place at the Oriental Hotel, Victoria Island, Lagos, with the theme, ‘Global Mobility and Taxation of Expatriates in Nigeria’.
The event which brought together stakeholders, including captains of industry, corporate executives, tax experts and professionals, legal practitioners and members of the Judiciary, had as the Guest Speaker, Mr. Olaleye Adebiyi, the Country Managing Partner, Andersen Tax, Nigeria.
Speaking at the event, Mr. Atilola hinted that, the Annual Lecture was conceived as a forum for Continuing Legal Education for members of the legal profession and the business community.
He explained that, the Annual Lecture series also serves as part of his law firm’s Corporate Social Responsibility.
On the choice of the 2019 theme, he said, “The theme for this year’s Lecture represents and reflects the mood of the Nigerian business community, and that of the Nigerian economy. Currently, the Federal Government is making efforts to encourage and attract foreign investments, which of course include, migration of Expatriates to Nigeria. In that mood, a discussion on taxation of expatriates, will be a very appropriate discussion at this time”.
According to him, the issue of multiple taxation has been a subject of discussion across various levels in Nigeria, adding that, multiple taxation is a disincentive to business, including foreign investments.
“I’m sure the appropriate authorities, are listening to the complaints. And, I think there are lots of reforms ongoing to cut down some of these excess taxes. So, it is true that there are cases of multiple taxation at the State level, local government level, and sometimes at Federal level. But, like I said, there are reforms that promise to address it, and we are patiently waiting for the impacts of these reforms in this regard because, indeed, taxation has to be friendly to encourage voluntary compliance”, he explained. The National Tax Policy for instance, seeks to address the challenges of multiple taxation among other tax issues in Nigeria.
Delivering the highly
technical but refreshing Lecture, the Guest Speaker, Mr. Adebiyi, took his time to explain the position of Taxation of Expatriates in Nigeria before the 2011 amendments, after the 2011 amendments and international issues on Expat’s Taxation.
He said multinational companies need a global workforce, and this brings about the concept of global mobility, adding that, these companies typically allow global mobility functions for different possible reasons which include; to establish operations in new locations/jurisdictions, to adequately prepare for global production, to increase sustainability and development of the Company, to disperse innovation and enhance overall success of the Company, to promote diversity in employment; and increase research and sales, through the exposure of the Company’s employees.
According to the Tax Expert, Personal Income Tax Act, as amended, (PITAM) 2011, is the legal basis for the imposition of personal income tax (PIT) on employees in Nigeria, while the Pay-As-You- Earn (PAYE) is a system whereby employers are deemed to be the agent of the tax authority, for the purpose of remitting the taxes deducted from their employees’ salaries. According to him, income earned by expatriates working in Nigeria or by expatriates outside Nigeria for work performed in Nigeria, is liable to PIT, under the PITAM.
He noted that, prior to the 2011 amendments to the Personal Income Tax Act (PITA), the taxation of income from paid employment was deemed to be derived and taxable in Nigeria, if the duties of the employment are wholly or partly performed in Nigeria and if the employer is in Nigeria, unless the duties of the employment are wholly performed, and the remuneration paid, in a country other than Nigeria, except during a temporary visit to or leave in Nigeria.
Adebiyi noted that, in Nigeria, taxation of individuals is generally based on the residency rule, and residents are taxable on their global income, adding that an individual is deemed resident in Nigeria, if that individual exercises the duties of his employment in Nigeria.
He said an expatriate is deemed to have derived income from Nigeria under certain circumstances, and that expatriates are not required to make contributions to Nigerian Pension Scheme.
According to him, overall, taxation of expatriates in Nigeria is not materially different from the taxation of other Nigerian residents.
He however, listed practical challenges with Expatriates’ Taxation to include, determination of actual amount of income derived in Nigeria, possible understatement of income leading to deemed income assessment, preference of companies for taxation of their expatriates on deemed income basis, inadequate tax planning and undefined employment contract.
He gave the possible solutions to these challenges, as compliance with the relevant tax laws and regulations, constant re-evaluation of the company’s tax structure and exposure, proper record keeping of relevant documents in case of an audit, knowledge of the Double Taxation Treaties, adequate tax planning in defining the compensation structure, nature of contract etc, and seeking professional guidance.
Other dignitaries at the event were, Professor Taofeeq Abdulrazaq who is reputed to be the first Professor of Tax Law in Nigeria, Professor Abiola Sanni, President, Chartered Institute of Personnel Management of Nigeria, Mr. Wale Adediran, Mr Jelili Owonikoko, SAN, Prof Olawale Ajai of the Lagos Business School, and Head, Human Resources of Halogen Group, Mr. Kenneth Nta.