State Internal Revenue Service (SIRS) has launched an aggressive tax collection drive among expatriates in the country, who are taxable on their worldwide incomes irrespective of where they were paid.
According to Taiwo Oyedele, senior consultant of PricewaterhouseCoopers, there is a history of endemic tax evasion by expatriates, including the sizeable number of South Africans, who rarely disclose their actual incomes or sometimes understate their earnings.
Often, this takes the form of only disclosing to the revenue authorities the income they are actually paid in Nigeria, offshore payment being omitted and the tax due thereon evaded, he added.
To block all tax evasion avenues and because the authorities do not have the wherewithal to ascertain the expatriates� actual incomes, SIRS, as empowered by the relevant laws, introduced the deemed income basis of assessment.
This anti-tax evasion mechanism enables SIRS to assess additional taxes, where they believe that income has been under-declared by expatriates.
In practice, Taiwo noted, the deemed income tax amount differs depending on the expatriate�s country of origin. Some companies now adopt this principle instead of following normal tax procedures, without the approval of SIRS, making it illegal.
He adds that the deemed income basis of assessment should, therefore, be applied as an exception rather than the rule and only at the discretion of the tax authorities.
Mar292006