Accessing foreign currency (forex) from Nigerian banks has become increasingly challenging for businessmen, exporters, and students studying overseas. The situation is now intensified due to the implementation of new stringent rules and regulations.
Although, the pressure on the naira in the foreign exchange market continues unabated as the Central Bank of Nigeria (CBN) maintains its intervention to keep the value of the currency stable
However, puzzled Nigerians are questioning the government’s decision to mandate its ministries, departments, and agencies (MDAs) to demand a valid Tax Clearance Certificate (TCC) from individuals seeking forex for any purpose.
Several banks have already notified their customers of this development through text messages, as the Nigerian government aims to ensure tax compliance among its citizens.
This move aligns with the provisions of Section 85 of the Personal Income Tax Act (PITA), 2011 (as amended), and Section 31(5) of the FCT-IRS Act, 2015, which have already been implemented in the Federal Capital Territory and other parts of the country.
According to a publication by the FCT-Inland Revenue Service, the regulation covers a wide range of transactions, including government loans, vehicle registration, applications for foreign exchange or exchange control permission, certificate of occupancy, government contracts, and contracts awarded by registered companies and government agencies.
Other transactions requiring a valid TCC include building plan approvals, trade licenses, property transfers, agent licenses, pools or gaming licenses, contractor registrations, distributorship applications, appointments or elections to public office, ownership transfers of vehicles, land plots, FCTA loans, and any other transactions as determined from time to time.
Under the new directive, MDAs, banks, and corporate entities must rigorously verify the authenticity of all presented TCCs by consulting the issuing tax authority.
The FCT tax authority states that this development stems from the need to ensure that all residents of the FCT fulfill their tax obligations as required by law.
Enhancing Revenue Generation
The FCT-IRS further asserts that it will conduct routine monitoring and enforcement exercises monthly, quarterly, or annually to fulfill its mandate of improving revenue generation and ensuring compliance. It warns that strict sanctions will be imposed on non-compliant entities as stipulated by law.
Additionally, the FCT-IRS emphasizes that filing annual tax returns is mandatory for all FCT residents, and obtaining a TCC is a prerequisite for compliance.
The monitoring exercise will, therefore, evaluate the promptness of annual return filing and the demand for TCCs in the aforementioned transactions.
In an update regarding foreign exchange requests and transactions, banks have informed their customers that they must provide their TCCs before foreign exchange transactions can be processed.
This requirement applies to various transactions such as PTA/BTA (Personal Travel Allowance/Business Travel Allowance), international school fees, medical expenses, personal remittances for home maintenance, and other similar purposes.
From $4,000 to $2,000
Earlier this year, commercial banks implemented measures to reduce personal travel allowance (PTA) and business travel allowance (BTA) by 50 percent, from $4,000 to $2,000. Students who were accessing up to $4,000 in the past will no longer have such access. This decision has been made to help manage the country’s dollar demand.
Additionally, the frequency of PTA/BTA requests has been reduced from once a quarter to twice a year. Banks informed their customers last year that starting this year, PTA/BTA requests can only be presented twice annually instead of four times, and the disbursement will be made in the form of dollar cards.
These measures are likely being taken in response to economic conditions and the need to control the outflow of foreign currency reserves. The aim may be to ensure a more sustainable balance of payments for the country, particularly regarding dollar demand.