Federal Government releases a new Executive Order on Voluntary Offshore Assets Regularization Scheme (VOARS)

Introduction

The Federal Government of Nigeria (FGN), on 8 October 2018 launched the Voluntary Offshore Assets Regularization Scheme (VOARS or the Scheme). The Scheme is effective 8 October 2018 and it’s expected to last for a period of twelve months.

Details

Nigerian taxpayers who hold offshore assets and generate offshore incomes are required to voluntarily declare those assets and incomes for which no prior taxes were paid, and make a one-time levy of 35% on the total offshore assets or undergo investigation and enforcement procedures concerning the offshore assets pursuant to information now
readily available through the automatic exchange of information between Nigeria and other countries. For participation in the Scheme, taxpayers will enjoy immunity from prosecution for tax offences and offences related to the offshore assets.

The Scheme is open to all persons, entities and their intermediaries holding offshore assets and are in default of their tax obligations, including those who are not under investigation by law enforcement agencies in Nigeria or any other country and those who have not been charged with any crimes. The FGN intends to set up a VOARS office in Switzerland for all categories of taxpayers who have defaulted in declaration of their offshore assets and
payment of taxes due further to the terms and conditions of the Order.

Implication

It will be recalled that the Federal Government of Nigeria through the Federal Inland Revenue Service (FIRS) introduced a similar Scheme in 2017 – Voluntary Asset and Income Declaration Scheme (VAIDS). The Scheme provides some form of clemency to taxpayers who would take opportunity to regularize their tax affairs. VOARS is therefore expected to facilitate the regularization of offshore assets connected to Nigeria. It is unlikely that the Order will apply to corporate taxpayers given the fact that they prepare, file comprehensive audited financial statements that capture their entire assets and pay appropriate taxes on the relevant tax bases. More so, computing 35% of asset value as a waiver appears to reflect a mismatch given that the amount would be significantly higher for individual taxpayers than the actual applicable tax rate (including interest and penalty). Thus, the VOARS may not be sufficient incentive for some taxpayers.

Our Comments

While this is a good development, there are concerns regarding the basis vis-à-vis legality of one-time payment of 35% on assets in exchange for immunity for prosecution for tax offences. It is also not clear what period the assessments would cover and how far back the audits and investigations would go. We expect that the FGN will provide more information that will clarify these issues soon.

However, taxpayers are advised to engage their tax consultants and review the components of their offshore assets and incomes to ascertain the benefits to be derived in taking advantage of the Scheme.