Mabiz Global

Mabiz Global Mabiz Global Nigeria Limited.

is an indigenous multi-disciplinary professional practice firm with a niche in Financial and Risk Advisory, Taxation, Information systems, Management consulting, Human Capital Development and other Assurance services.

19/06/2020

*ACCOUNTING TERM OF THE WEEK ACCOUNTING ESTIMATE*

It takes knowledge to be aware of accounting estimates (AE), it takes skill (and maybe experience) to know when and how to apply the knowledge of accounting estimates. Here are some info about estimates:

1. Estimates are about the future (very easy to remember and forget).
2. Because of (2) above, assumptions about the future are usually involved in making estimates.
3. These assumptions must be based on reasonable and supportable basis. In practice, making the assumptions is usually a topic of debate between the accountant and the auditor. For example, for the purpose of a going concern cash flow forecast, the accountant may think an estimated revenue of N20m may be appropriate but the auditor may think this is too high. Bottom line is that the estimate used must be reasonable and supportable!

4. As a result of the subjectivity in (3) above, IAS 1.125 requires an entity to disclose the significant assumptions it makes about the future.
5. Possible areas of estimates:
a) Useful life of an asset.
b) Expected credit losses (financial assets).
c) Cost estimate for future decommissioning cost.

15/06/2020

DEDUCTION OF VALUE ADDED TAX AT SOURCE BY COMPANIES OPERATING IN THE OIL AND GAS INDUSTRY

Section 13(2) of the Value Added Tax (VAT) Act, CAP V1, LFN 2004 (as amended), states that “the Service may, by notice, determine and direct the companies operating in the oil and gas sector which shall deduct VAT at source and remit same to the Service”.

Further to the provisions of the VAT Act, FIRS issued Information Circular No. 02/2007 – Notification of Guidelines on the Implementation of VAT Deduction (Reverse Charge) and New Payment Arrangement with Respect to Fees, Levies, and other Charges Payable by Companies in Oil and Gas Industry.

By the information circular, the FIRS mandates all companies operating in the Nigerian Oil & Gas Sector, to deduct VAT charged by their suppliers or contractors from the payments due and remit the same to the FIRS.

The Service observed that some companies are not complying with the notice to withhold and remit VAT. Consequently, the FIRS hereby clarifies as follows:

That the directive contained in the FIRS Information Circular No. 02/2007 mandating all Companies operating in the Oil & Gas Sector to deduct VAT at source and remit the same to FIRS in line with the above provisions still subsist.

“Companies operating in the oil & gas sector” include all companies engaged in (i) upstream operations, (ii) downstream operations, (iii) Refineries (iv) oil serving companies and (v) any other business operations in the upstream, midstream or downstream oil & gas sector.

VAT deducted shall be separately accounted for on VAT Form 002A and remitted to the FIRS. It shall not be merged with VAT charged by the company to its customers.

Where the FIRS had issued any directive, ruling, or notice contrary to the directives contained in the Circular referred to in this notice, such directive, ruling, or notice is hereby withdrawn, invalidated, and voided.

Failure to deduct and remit VAT shall attract sanctions in accordance with the law.

Consequently, all taxpayers especially companies operating in the Oil and Gas sector, tax practitioners, tax officials, other stakeholders, and the general public are to be guided accordingly.

13/06/2020

NITDA Issues Guideline for Management of Personal Data by Public Institutions in Nigeria

Summary

On 18th May, 2020 the National Information Technology Development Agency (NITDA) issued Guidelines for the Management of Personal Data by Public Institutions in Nigeria, 2020 (“the Guidelines”). The Guidelines govern the roles and responsibility of public officers and public institutions with regards to the processing and management of personal data in compliance with the Nigeria Data Protection Regulation, 2019 (NDPR).

Details

NITDA issued the NDPR on 25th January, 2019, as a framework for the protection and regulation of the collection, processing and management of personal data of individuals who are Nigerian citizens and persons resident in Nigeria while the Guidelines were issued pursuant to Section 6 (a & c) of the National Information Technology Development Agency Act 2007 (NITDA Act) and the NDPR, 2019.

The Guidelines seek to provide guidance to Public Officers on how to handle and manage personal information in compliance with the NDPR and it applies to all Public Institutions in Nigeria including Ministries, Departments, Agencies, Institutions, Public Corporations, publicly funded ventures and incorporated entities with government shareholding at Federal, State or Local Government level.

Specifically, the Guidelines impose several compliance obligations on public institutions, including the following:

Public institutions are required to obtain consent from data subjects for processing of personal data in specified situations;


Every public institution that wishes to process personal data of Nigerians received from other public entities, private entities or an international organisation is required to put in place measures to demonstrate the following:
- Compliance with International Security Standards such as ISO 27001:2013 or any similar standard;

- Data Protection Impact Assessment and submission of same to NITDA;

- Retention of a Data Protection Compliance Organisation (DPCO) to guide it in the use of the personal data for compliance purposes.

Every public institution is required to appoint a Data Protection Officer (DPO) within 90 days of the issuance of the Guidelines and to maintain a Privacy Policy with certain specified details;

All databases containing personal data are to be stored in digital databases with restricted or controlled access within 60 days from the issuance of the Guidelines.
The Guidelines further stipulate the obligations of Data Controllers with respect to sharing of personal data with a public institution and processing personal data on behalf of a public institution.

Failure to comply with the provisions of the Guidelines is an offence under the NITDA Act and the NDPR. In this regard, principal officers of public institutions who breach the provisions of the Guidelines will be personally liable for the breach or misuse of information shared from personal data, either while in office or after expiration of their term of office. The Guidelines, however, provide that parties may approach the Administrative Redress Panel established under the NDPR to seek redress following a determination of breach by NITDA

Implication

The issuance of the Guidelines indicates NITDA’s commitment to enforcing the provisions of the NDPR in both the private and public sectors and makes it imperative for all public institutions in Nigeria to immediately comply with the provisions of the NDPR and the Guidelines. The COVID-19 Pandemic has created a new reality, where government officials now have to work from home and utilise different technology platforms for their official duties. There is therefore a heightened urgency to ensure that all government data and especially personal data is handled with care and in line with the provisions of the NDPR and the Guidelines. The imposition of personal liability on principal officers of a defaulting Ministry, Department or Agency of Government (including publicly funded ventures and companies with Government shareholding) during or after their term in office, gives NITDA wide powers of enforcement, which means principal officers should be particularly interested in ensuring their institutions comply with the relevant provisions of the NDPR and the Guidelines.

Given the above, all public institutions covered under the NDPR and the Guidelines and engaged in the collection, storage and use of personal data of individuals in Nigeria should urgently put in place steps to ensure compliance by engaging a DPCO that will advise them on the required compliance steps within the relevant timelines. This will enable them to better understand their compliance obligations under the NDPR/Guidelines as required by NITDA and avoid any misuse of government or personal data in their possession.

11/06/2020

Minister of Finance Issues VAT Modification Order

Summary

The Honourable Minister of Finance, Budget and National Planning (“the Minister”) recently issued the Value Added Tax (“VAT”) Act (Modification Order), 2020 (“the Order”), which is effective from 3rd February, 2020. The Order modifies and expands the list of exempted goods and services in the First schedule to the VAT Act and provides clarification on the exempted items already listed in the VAT Act.

Details

Section 38 of the VAT Act (“the Act”) empowers the Minister to amend, vary or modify the list set out in the First Schedule to the Act. Pursuant to these provisions, the Minister has issued the Order to modify and expand the list of items to include certain listed items and sets out their Common External Tariff (CET) codes. The Order also provides further clarification on amendments introduced by the Finance Act, 2019 (FA) to the VAT Act.

The Order defines a number of VAT exempt items listed in the First Schedule to the VAT Act which include Basic Food Items, Baby Products, Medical and Pharmaceutical Products, amongst others.

Specifically, the Order defines Basic Food Items as agro and aqua based staple food and include honey (raw or semi processed), white and brown bread, cereals (raw or semi processed), cooking oil, milk (whether fresh, liquid and powdered), fruits (whether fresh or dried), roots, live or raw meat, water (including table water) amongst others. The Order however, excludes Basic Food Items sold in restaurants, hotels, eateries, lounges and other similar premises and those sold by contractors, caterers and other similar vendors from enjoying the VAT exemption.

In addition, the Order defines Baby Products as products made for the use of babies from birth to 36 months (3 years) of age, this include baby activity and entertainment products, baby bathtub, sponges, towels, baby creams, powders, baby carriage and parts, baby garments and clothing of any material, feeding products such as water bottle, sanitary wares such as diapers.

Pharmaceutical Products are defined as components and finished products of both modern and traditional medicine intended for human use in the diagnosis, cure, mitigation or prevention of disease or injury, while Medical Products according to the Order refer to devices requiring calibration, maintenance, repair, user training and decommissioning used for the specific purposes of diagnosis and treatment of disease or rehabilitation following an injury.

The Order further exempts residential accommodation rented by persons other than corporate entities from VAT. It also exempts Shared Passenger Road Transport Service available for use by the general public. However, hired or rented vehicles or transportation apparatus for private use are not VAT exempt.

Implication

The Order modifies the First Schedule to the VAT Act by effectively expanding it and providing relevant interpretations of terms that had previously led to contentions between tax authorities and taxpayers.

However, some areas of contention still remain, for example, the exclusion of basic food items sold in in restaurants, hotels, eateries, lounges and other similar premises from the general definition of the term seems to import a limitation that is not provided in the VAT Act or the Finance Act, 2019. But more importantly, the recent decision of the Federal High Court in Lagos in the case of Registered Trustees of Hotel Owners and Managers Association of Lagos v Attorney General of the Federal & Minister of Finance (Hotel Owners’ Case) which held that the Minister lacks the powers to amend or vary the schedule to an Act may bring up questions concerning the validity of the VAT Modification Order. Although the subject matter in the Hotel Owners’ case centred around the validity of the Taxes and Levies (Approved list for Collection) Order, 2015 issued pursuant to the Minister’s power under the Taxes and Levies (Approved List for Collection) Act, given that the powers exercised by the Minister in issuing the VAT Modification Order, which are provided under the VAT Act are similarly worded like those under the Taxes and Levis Act, it is imperative for the Minister to quickly address any concerns that may be occasioned by the decision in the Hotel Owners case pertaining to the validity of the VAT Modification Order.

Pending any further developments regarding the VAT Modification Order, taxpayers are advised to consult with their tax advisors to determine the application of the Order to their businesses and how they can take advantage of the exemptions listed in the Order.

FCT-IRS Extends deadline for filing of annual tax returns
30/05/2020

FCT-IRS Extends deadline for filing of annual tax returns

The foreign exchange market is where currencies are traded. Currencies are important to most people around the world, wh...
29/05/2020

The foreign exchange market is where currencies are traded. Currencies are important to most people around the world, whether they realize it or not, because currencies need to be exchanged in order to conduct foreign trade and business.

If you are living in the Nigeria and want to buy appliances from France, either you or the company that you buy the apppliances from has to pay the French for the cheese in euros (EUR).

This means that the Nigerian importer would have to exchange the equivalent value of the NIgerian Naira (NGN) into euros. The same goes for traveling. A French tourist in Egypt can't pay in euros to see the pyramids because it's not the locally accepted currency. As such, the tourist has to exchange the euros for the local currency, in this case the Egyptian pound, at the current exchange rate.

One unique aspect of this international market is that there is no central marketplace for foreign exchange. Rather, currency trading is conducted electronically over-the-counter (OTC), which means that all transactions occur via computer networks between traders around the world, rather than on one centralized exchange.

The market is open 24 hours a day, five and a half days a week, and currencies are traded worldwide in the major financial centers of London, New York, Tokyo, Zurich, Frankfurt, Hong Kong, Singapore, Paris and Sydney across almost every time zone.

This means that when the trading day in the U.S. ends, the Forex market begins anew in Tokyo and Hong Kong. As such, the Forex market can be extremely active any time of the day, with price quotes changing constantly.

28/05/2020

ACCOUNTING TERM OF THE DAY-* HEDGE*

A business is faced with different risk and has to find ways to manage or limit the negative exposure from such risk. One of such ways of managing risk is through hedging. A simple example of hedging is the insurance of our personal cars. We pay a premium to an insurance company to insure a vehicle, such that in case of any damage to the vehicle, the insurance company pays the owner to the tune of the cost required to take the vehicle to the state before the damage. Hedging is built on the premise of risk trade off and also takes away potential gain. For example if no damage occurs with the car during the period of the insurance then the money paid is as good as gone. Most times to hedge, businesses enter into transaction which move in opposite direction of the risk such that when there is a loss the hedge instrument results in a gain.
The question is when crude oil prices drops, what can one invest in during such a period that would result in a gain?

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