May 27, 2021
On 21st April, 2021, the Federal Inland Revenue Service (FIRS or “the Service”) issued a Public Notice to all taxpayers (companies, partnerships, executors, trustees, community, families or individuals), tax practitioners and the general public reminding taxpayers who dispose of chargeable assets, to file their Capital Gains Tax Returns (CGTR) as and when due.
Section 2(4) of the Capital Gains Tax Act (CGTA) (as amended by the Finance Act, 2020) provides that every person having disposed a chargeable asset shall, not later than 30th June and 31st December of that year, compute the Capital Gains Tax, file self-assessment return and pay the tax computed in respect of the chargeable assets disposed in the period. Based on the foregoing, the Notice provides further clarification that the due date for filing Capital Gains Tax Returns and payment of Capital Gains Tax is the earlier of 30th June and 30th December, immediately after the disposal. The Notice further explains the timeline for filing the returns as follows:
|For Chargeable assets disposed from 1st January in a year to 30th June of that year||not later than 30th June|
|For Chargeable assets disposed from 1st July each year to 31st December each year||not later than 31st December|
|For Chargeable assets disposed prior to the coming of the Finance Act 2020||not later than 30th June, 2021|
The FIRS, in its Notice, further stated that any tax due and unpaid by the due date shall attract interest and penalties as provided in the extant laws.
The Notice has provided additional clarification to the ambiguity surrounding the deadlines for filing Capital Gains Tax Returns (CGTR) which was created by the Finance Act 2020. Therefore, taxpayers who have disposed or will dispose of chargeable assets before 30th June, 2021, are advised to file their CGTR on or before 30th June, 2021. Nonetheless, it is important to examine the practicability of filing CGTR for disposals as specified, especially for disposals that are concluded close to the filing dates. For instance, companies simply used to submit CGTR together with their income tax filing subsequent to the closure of accounting books. Thus, the taxpayers may have to resort to managing the timing of disposal of their assets to avoid closeness to the compliance dates and the resulting potential default. In view of the fast approaching initial deadline of 30th June, 2021, it is important for taxpayers who have disposed chargeable assets to liaise with their tax advisors to comply with their filing obligations in order the avoid attendant penalties.