Legal Alert – January 2015 – Change of Accounting Year – Law and Tax Implications

Introduction

By Law, every registered corporation must at least on an annual basis, file with the Companies Registry, its Audited Accounts or Audited Financial Statements which is a periodic summary of the transactions of the company for the subject period.

The Audited Financial Statements usually discloses the company’s assets, its liabilities, balance sheet, profit and loss accounts which in some jurisdictions is also known as the Income Statements.

Traditionally, the Accounting Reporting Period of a company is 1st January to 31st December of each calendar year. A company can however elect or choose to change its accounting date, subject to compliances with the provisions of the Companies and Allied Matters Act (“CAMA”), and the Companies Income Tax Act (“CITA”).

Possible Reasons for Change of Accounting Date

Some of the reasons that may warrant a company to change its accounting reporting date include:-

  1. The need to synchronise the accounting reporting dates of a company with the accounting reporting dates of other companies within a Group of companies.
  2. The convenience of having a singular stock and audit process at the same period of the year for companies within the same group, with common ownership and control.
  3. Where a merger or acquisition occurs, the accounting dates of the affected companies will need to be harmonised into a single accounting reporting date.

Companies Registry – Notice of Change of Accounting Date

CAMA gives to the Directors of a company the discretion to determine on what date, and for what period in each calendar year, the company’s Audited Financial Statements will be published. Once the date for the publishing of the Financial Statements is determined, a formal communication of such notification must be transmitted to the Corporate Affairs Commission (“CAC”) within fourteen (14) days.

Where the accounting period and the publication date of a company’s Audited Financial Statement is changed by a Shareholders’ special resolution, notice of such change must also be communicated to CAC.

However, the period between a former accounting date and a new one must not exceed eighteen (18) months.

For a holding company, except for good reason(s), the financial reporting dates for the holding company and its subsidiaries must be the same date.

Tax Implication of Change of Accounting Dates.

To prevent the deliberate failure to pay taxes, or to pay a properly assessed tax, or to delay in paying its taxes; which is commonly known as tax evasion; and thereby incur punitive penalties for non-compliance, it is highly recommended that a company that changes its accounting reporting dates must ensure that it files it’s tax returns covering each and every day, from the date of the last tax return to the new accounting reporting date.

By the provisions of the Companies Income Tax Act  (“CITA”), any company that changes its accounting reporting date from the traditional 1st January – 31st December of each year, to another reporting period, must communicate the change to the Tax Authority, which is the Federal Inland Revenue Service (“FIRS”).

The Tax Authority is in turn required to, on the receipt of the notice of change of accounting date, compute such a company’s taxes from the date of the last filed tax return to the last date before the new accounting reporting date commences.

Penalty for Failure to File Tax Returns After Date Change

Where however, a company that changes its accounting reporting date fails to file its tax returns with the Audited Accounts or Financial Statements attached, up to the last date before the new accounting date starts, the tax authority is required to compute such a company’s taxes for the relevant year and for the next two (2) years following by utilising the Tax Authority’s Best Of Judgment Assessment in arriving at the taxes payable by such a company.

Taxation and Best of Judgement

A Best of Judgement Tax Assessment arises where a tax payer, in response to a formal tax demand, fails to provide to the Tax Authority sufficient and convincing income records; or does not pay any tax for the tax assessment period in question.

Our Courts of Law do not however allow a Best of Judgement Tax Assessment that is manifestly unreasonable, irrespective of whether the tax payer challenges the Best of Judgement tax assessment or not.

Mindful of the judicial authorities on this point, the Federal Inland Revenue Service has issued tax circulars which naturally emphasises that a Best of Judgement tax assessment for an on-going business concern will be based on the preceding year’s tax assessment, with the next two (2) years following the year when the accounting date change occurred.

Naturally, the greater of the aggregate tax assessment for the last accounting period and the tax assessment for the subsequent two (2) years will be chosen by the Tax Authority as the Best of Judgment tax assessment for the tax payer to liquidate this tax debt.

DISCLAIMER NOTICE

This is a free educational material which does not create a Client/Attorney relationship. Readers are advised to always seek professional legal advice to their specific situations from qualified Legal Practitioners. Questions, comments, observations, suggestions, new ideas, contributions, etc. are always welcomed. You can also visit our website www.oseroghoassociates.com for more legal materials.

INTELLECTUAL PROPERTY PROTECTED.

This material is protected by International Intellectual Property Laws and Regulations. This material can only be re-distributed for non-profit educational purposes only on the strict condition that our authorship is acknowledged, and the Disclaimer Notice is prominently displayed.

Introduction.

Taxation is a statutory contract between a government and its citizens, for the citizen’s proportionate financial contributions with which public services that will enhance development and general well-being are provided.

Like all contracts, the statute of limitation rule also applies to tax and pension matters.

A Statute of Limitation is the time limit or period within which a claim can be asserted or insisted upon. Some of the reasons for the statute of limitation rule include the need for claims to be timely and diligently pursued or presented while the evidence and the witnesses are available, and their memory of the facts and events are fresh.

A further reason for the statute of limitation rule is that it brings predictability and finality to claims within a reasonable period of time.

Statute of Limitation in Tax Matters.

Under the Companies Income Tax Act and the Personal Income Tax Act, the limitation period for asserting tax claims is six (6) years from the date when the final tax assessment became due for payment.

The statute of limitation rule will not however apply where the tax payer is guilty of fraud, wilful default or neglect in the settlement of a tax assessment. These very wide exemptions to the limitation period rule continues to be used by the tax authorities to deprive tax payers of claiming relinquishment of “stale” tax assessments under this six (6) years rule.

What is Fraud, Wilful Default or Neglect?

Fraud is the deliberate misrepresentation or perversion or concealment of the truth with the intention that another person will rely on such misrepresentation, perversion or concealment, to his, or her, or its detriment or prejudice.

Wilful Default on the other hand is the voluntary and intentional omission to carry out a duty.

Neglect is the omission to pay proper attention.

Pre–Action Notice and Statute of Limitation

By Section 12 (2) of the Education Tax Act, legal actions against the Education Trust Fund, its Board of Trustees and other senior officers of the Education Trust Fund must be commenced within three (3) months after the infringing act, neglect or default has occurred. Where the damage or injury is of a continuing nature, legal action must be commenced within six (6) months after the continuance complained about ceased.

To commence a legal action against the Education Trust Fund, a one (1) month pre-action notice must be served on this Fund. And the pre-action notice must disclose the name and place of abode of the complainant, the particulars of the injury, the neglect or default complained about, and the reliefs intended to be claimed as a result.

Under the Pension Reform Act 2014, a pre-action notice of thirty (30) days is also required to be served on the National Pension Commission before any law suit can be validly commenced.

Conclusion

A judicial pronouncement on what amounts to wilful default or neglect in asserting a tax claim that is unpaid six (6) years after the final assessment was issued will be very helpful in reconciling the current practice where the interpretation of what amounts to wilful default or neglect by the tax authorities administratively holds unchallengeably.

DISCLAIMER NOTICE

This is a free educational material which does not create a Client/Attorney relationship. Readers are advised to always seek professional legal advice to their specific situations from qualified Legal Practitioners. Questions, comments, observations, suggestions, new ideas, contributions, etc. are always welcomed. You can also visit our website http://www.oseroghoassociates.com for more legal materials.

INTELLECTUAL PROPERTY PROTECTED.

This material is protected by International Intellectual Property Laws and Regulations. This material can only be re-distributed for non-profit educational purposes only on the strict condition that our authorship is acknowledged, and the Disclaimer Notice is prominently displayed.

Introduction.

The joint ownership of a property or properties continues to be a more common means of wealth creation. Joint ownership in some other instances serve as a succession plan that reduces estate taxes, Attorney Fees, etc.

As it is common with humans, the joint ownership of a property, either by contract, gift or by inheritance can lead to disputes and litigation between the surviving owner or owners and the deceased owner’s heirs, especially if the joint ownership instrument is not carefully drafted.

Joint Tenancy.

Joint Tenancy is the right to the ownership of a property, by more than one person, such that on the death of any of the joint owners, the deceased owner’s portion of the property passes to the surviving owner or owners of the property. The deceased owner’s estate and heirs under a joint ownership structure will receive absolutely nothing.

Also, subject to whether words of severance or separation are used in the title instrument under which the property is held, an owner to a jointly held property cannot alienate his or her interest in such a property without the express consent of the other co-owner(s) to the property.

Joint Owners and Tenants-in-Common.

The opposite to the above described joint tenancy scenario is the principle known as Tenants-in-Common which arises where the property’s instrument of title have words of severance or separation or distribution of the subject jointly held property. Where words of severance or separation are used, the words of severance or separation entitles the heirs or estate of a deceased owner to assume ownership of the deceased share of the property, with the surviving owner or owners of the property.

Conclusion.

Ensuring that the title document under which a property that is jointly owned is carefully drafted to achieve the estate plan of the owners of the property is strongly recommended. Where the joint owner or owners do not want their heirs to inherit any portion of the property on their demise, then no words of severance or separation should be used when drafting the instrument of ownership. Where the intention is for the heirs to inherit, then words of severance, separation or distribution should be used when drafting the instrument of ownership.

DISCLAIMER NOTICE

This is a free educational material which does not create a Client/Attorney relationship. Readers are advised to always seek professional legal advice to their specific situations from qualified Legal Practitioners. Questions, comments, observations, suggestions, new ideas, contributions, etc. are always welcomed. You can also visit our website www.oseroghoassociates.com for more legal materials.

INTELLECTUAL PROPERTY PROTECTED.

This material is protected by International Intellectual Property Laws and Regulations. This material can only be re-distributed for non-profit educational purposes only on the strict condition that our authorship is acknowledged, and the Disclaimer Notice is prominently displayed.

Introduction

A common global money laundering preventative measure is for Banks and other Designated Non-Financial Institutions (“DNFIs”) like Professional Practice Firms, Hotels, Casinos and the like, who perform fiduciary duties to always ensure that before and during the period of rendering these fiduciary services, they obtain and retain updated verifiable identification and location documentation on their customers or clients.

One of the know-your-customer (“KYC”) requirement is for the Institution concerned to request and obtain from all its customers, a third-party reference indicative of the good standing of the Customer to enjoy the fiduciary services of the Institution, Firm or Corporation concerned.

Unfortunately, many third parties who sign Reference Forms are not aware, and where they are aware, they are not mindful of the money laundering risks, which are criminal in nature, of signing Reference Forms in favour of persons whose character they are not very familiar with and cannot therefore vouch for.

Some of the money laundering risks of signing a Reference Form or forms is considered in the following paragraphs.

Money Laundering and KYC

The Money Laundering (Prohibition) Act as amended in 2012, requires all Financial and DNFIs to always ensure that they undertake due diligence investigation when establishing and maintaining a business relationship with a customer.

Such due diligence investigation must authenticate the identity of the customer, the nature of the customer’s business, sources of funds and ascertain a money laundering risk profile for each customer or client.

Some of the verifiable means of identifying a customer includes obtaining the customer’s proof of identification – i.e. international passport or national identity card or driver’s license, etc; and proof of residence – i.e. utility bills; and third-party recommendation – i.e. signed Reference Form by an individual or Institution, Anti-Money Laundering EFCC/SCUML Registration Certificate; Tax Identification Number (“TIN”); etc.

As a result of a Credit Bureau System that is still at its elementary stage of development, cases of the identity of a customer of a financial Institution or a DNFI, when a financial crime is committed, usually exposes the Referee(s) to criminal investigation, with possible police detention and avoidable Attorney fees.

Anti-Money Laundering/Combating Financing of Terrorism Regulation

The Anti-Money Laundering/Combating Financing of Terrorism Regulations (“AML/CFT Regulations”) provides some guidance to financial institutions under the regulatory purview of the Central Bank of Nigeria (“CBN”) regarding compliance with the Laws on money laundering, terrorism, trafficking in human beings and the sexual exploitation of children, etc.

Thus, financial institutions should not establish any business relationship with a customer until all the relevant parties to the transaction are independently identifiable, and the nature of the business that the customer intends to conduct are ascertainable.

The AML/CFT Regulations requires financial institutions to regularly conduct customer due diligence, which for individuals will include confirming the Customer or Client correct legal names, permanent physical and or residential address, telephone numbers and email address, nationality, etc. The customer providing the Bank with his or her or its personal and other Bank References is also a legal requirement.

Some of the sanctions for non-compliance with the above due-diligence requirements include the imposition of a penalty not exceeding N2,000,000 (Two Million Naira) for each infringement, from the first to the fifth infringement. On the sixth infringement, the CBN shall set up an investigation panel to forensically examine the infringements and recommend more punitive punishment for the offenders.

Conclusion

It is strongly recommended that you heed the warning in the Reference Form provided by financial institutions and DFNIs which warning usually states that “CAUTION: it is dangerous to introduce any individual not well known to you”.

DISCLAIMER NOTICE

This is a free educational material which does not create a Client/Attorney relationship. Readers are advised to always seek professional legal advice to their specific situations from qualified Legal Practitioners. Questions, comments, criticisms, suggestions, new ideas, contributions, etc. are always welcomed. You can also visit our website http://www.oseroghoassociates.com for more legal materials.

INTELLECTUAL PROPERTY PROTECTED.

This material is protected by International Intellectual Property Laws and Regulations. This material can only be re-distributed for non-profit educational purposes only on the strict condition that our authorship is acknowledged, and the Disclaimer Notice is prominently displayed.

The Federal Inland Revenue Service (“FIRS”) has recently issued a Public Notice expressing its opinion that the tax exemption enjoyed by government institutions and corporate entities with pioneer status, does not exempt the incomes of such entities from corporate and personal income taxes; especially the advance withholding tax.

The above opinion of FIRS is premised on the provisions of Section 23(1) (n) of the Companies Income Tax Act (“CITA”).

The legal effect of the FIRS opinion is that all passive incomes – dividends, interest, rent or royalties – are liable to withholding tax, which is an advance and final tax on such income.

The year-end profits of the entity that enjoys tax exemptions, like government establishments and any corporation with pioneer status, will not however suffer any form of tax on its final profits during the period of the tax exemption.

Tax Newsletter – September 2014 – Tax Incentives and Expenditure Allowances

INTRODUCTION

To encourage further and continuing investments, various Tax Incentives and Tax Capital or Expenditure Allowances are embedded in the Statute Books waiting to be taken advantage of by businesses. Some of these investment incentives and expenditure allowances are succinctly highlighted in the following paragraphs. 

Note however that only expenditures that are wholly, exclusively, necessarily and reasonably incurred in the trade or business of the tax payer can be claimed as a capital expenditure.

Also note that the depreciation of the assets of a company is not allowed under the Companies Incomes Tax Act in Nigeria. Instead, Capital Allowances are allowed.

PIONEER STATUS

By the Industrial Development (Income Tax Relief) Act, the Nigerian Investment Promotion Commission Act and the Pioneer Status Incentive Regulations 2014, companies engaged in gazetted pioneer industries and products are entitled to apply for Pioneer Status, and when granted, enjoy tax exemption/relief/holidays, for an initial term of three (3) years, starting from the date that the pioneer company commences business. The tax holiday period may be extended for a period of one (1) year, and a further one (1) year term, subject to the level of development and the relative importance at the time of the industry to the development of the country.

To qualify to apply for Pioneer Status however, the Applicant Company must among other things be registered as a corporate entity in Nigeria; and must have incurred qualifying capital expenditure of not less than Ten Million Naira (N10Million) in the pioneer industry concerned. Also, the application for the Pioneer Status must be submitted within one (1) year of the Applicant Company’s commencement of commercial production.

SOLID MINERALS

A new company engaged in the mining of solid minerals is entitled to tax exemption for the first three (3) years of its operations.

AGRICULTURAL AND FOREIGN LOANS

Interest payable on loans granted to agricultural trade or businesses, local plant and machinery fabrication, and working capital for any cottage industry, is/are also exempted from tax provided that the moratorium of the loan is not less than eighteen (18) months, and the rate of interest on the loan is not more than the base lending rate at the time the loan was granted.

Also, losses arising from an agriculturally based trade or business are allowed to be carried forward indefinitely.

For foreign loans, interest payable on foreign loans is exempted from tax in the manner prescribed in the Table in the Third Schedule of the Companies Income Tax Act (“CITA”).

HOTELS TOURIST INCOME

Twenty-five per cent (25%) of the income derived by a Hotel, in internationally convertible currencies, from tourists using the services of such a Hotel, are exempted from any form of tax, provided that such income is paid into a domiciliary account Reserve Fund, to be utilised within five (5) years in the building expansion of new Hotels, conference centres and other new facilities which promote tourism development.

RURAL INVESTMENT ALLOWANCE

Where a company provides for the purposes of its trade or business infrastructural facilities like electricity, water or tarred roads, which must be at least twenty (20) kilometres from such facilities provided by the Government, such a company will be entitled to claim both the Initial Allowance on such expenditure, and a further Rural Investment Allowance whose rate is graduated based on the scale of the facilities provided.

Where no public facilities exist, a hundred percent (100%) Rural Investment Allowance will be allowed by the tax authorities on such rural infrastructural expenditure(s).

A Rural Investment Allowance cannot however be carried forward.

RECONSTRUCTION INVESTMENT ALLOWANCE

To compensate businesses that incur expenditures on plant and machinery, CITA allows to such companies a ten per cent (10%) Reconstruction Allowance of the actual expenditure incurred on such plant and equipment. This is in addition to the initial allowance granted on such plant and equipment.

A Reconstruction and a Rural Investment Allowance cannot however be claimed on the same expenditure.

RESEARCH AND DEVELOPMENT (R & D) ALLOWANCE.

Companies and other organisations engaged in Research and Development activities (“R&D”) for commercial purposes, are entitled to claim a twenty per cent (20%) investment tax credit on their R&D qualifying expenditures,

Other companies who undertake R&D activities to promote their trade or business are also entitled to claim the expenses incurred on such R&D provided that the R&D expenditures do not exceed ten per cent (10%) of the company’s total profits in the financial year that the expenditure was incurred.

DEPRECIATION AND CAPITAL ALLOWANCES. 

As it does not uphold of transparency and equity, the Companies Income Tax Act (“CITA”) disallows a company depreciating its assets. In place of the depreciation of a company’s assets, CITA makes provision for a transparent capital allowances regime which is encapsulated in CITA’s Second Schedule.

It is however only the qualifying expenditure expended on the assets of a company, which assets are wholly, exclusively, necessarily and reasonably utilised in the company’s trade or business, that are entitled to submit such claims for any kind of tax allowances.

INITIAL AND ANNUAL ALLOWANCES.

CITA allows a company to claim in its first year of use, an Initial Allowance on a capital expenditure expended on a business asset. The rates allowed for each asset group as an Initial Allowance is set out in Table 1 of Schedule 2 of the CITA.

For the following years that the asset is in use, the owner of the asset can claim an Annual Allowance which is the remainder of the Initial Allowance permitted under Table II of the Second Schedule of CITA.

Where a company purchases new plants and machineries in replacement of its old plants and machineries, such a company is allowed a once and for all ninety-five per cent (95%) capital allowance in the first year of the use of the asset. The remainder five per cent (5%) of the value of the asset is required to be retained in the financial books of the company until the asset is disposed off.

BALANCING ALLOWANCES AND BALANCING CHARGES

Balancing Allowances and Balancing Charges are other tax reliefs that a company can claim when it disposes of an asset.

A Balancing Allowance is the difference between the residual value of the asset and its sale value. This difference in an allowable tax deduction which can be written against the profit and loss accounts of the affected company.

Where the value of the asset at the point of its disposal is higher than the residual value of the asset, a Balancing Charge arises with the excess value written back to the profits of the company and taxed accordingly.

Note however that the maximum claim for capital and investment tax allowances that will be granted by the tax authorities is ninety-five per cent (95%) of the total cost of the qualifying asset.

EXPORT INCENTIVES

To promote the indigenous manufacture of products for export, various Export Incentives exist; like the Manufacture-In-Bond Guarantee; Duty Drawback Schemes; etc. Also in existence are Export Processing Zones for oil, gas and none oil and gas enterprises.

Products manufactured in Export Free of Export Processing Zones can only enjoy tax exemption if they are exported to another country, other than Nigeria.

CONCLUSION

In conclusion, fictitious, artificial or none bona-fide expenditures will not qualify to claim any tax allowance or relief. 

DISCLAIMER NOTICE

This is a free educational material which does not create a Client/Attorney relationship. Readers are advised to always seek professional legal advice to their specific situations from qualified Legal Practitioners. Questions, comments, criticisms, suggestions, new ideas, contributions, etc. are always welcomed. You can also visit our website www.oseroghoassociates.com for more legal materials.

INTELLECTUAL PROPERTY PROTECTED.

This material is protected by International Intellectual Property Laws and Regulations. This material can only be re-distributed for non-profit educational purposes only on the strict condition that our authorship is acknowledged, and the Disclaimer Notice is prominently displayed.

Pension Alert – August 2014 – New Pension Reform Act 2014 – Compliance Highlights

The Pension Reform Act, 2014 repealed the 2004 Pension Reform Act, No. 2 with the objective of improving the Uniform Contributory Pension Scheme, and the retirement benefits following thereof, for persons in the public and private sectors of the Nigerian economy. Persons in the Armed Forces, Intelligence and Secret Services continue to be exempted from this Contributory Pension Scheme.

It is now obligatory for employers in the private sector of the economy, with fifteen (15) or more employees, to register and make contributions to the Pension Contributory Scheme. Self-employed persons and employers with less than three (3) employees have the option to decide whether or not to join the Pension Contributory Scheme, in accordance with the Guidelines that the National Pension Commission may issue from time to time.

RATE OF PENSION CONTRIBUTIONS

The monthly rate of contributions to the Pension Contributory Scheme is now a minimum of ten per cent (10%) of each employee’s monthly emolument to be contributed by the Employer, and a minimum of eight per cent (8%) of each employee’s monthly emolument, to be contributed by the Employee.

Employers and employees are allowed to increase their pension contributions beyond the minimum rates prescribed under this Law. An employer can also elect to bear the entire monthly Pension Contribution, provided that such a contribution shall not be less than twenty per cent (20%) of the employee’s total monthly emolument.

The penalty for not deducting and or remitting a Pension Contribution within seven (7) days of the payment of every employee’s monthly emolument shall not be less than two per cent (2%) of the total contribution that remains unpaid or unremitted by the employer.

GROUP LIFE INSURANCE COVER

The 2014 Pension Reform Act reinstates the compulsory Group Life Insurance Cover – previously provided for under the repealed 2004 Pension Reform Act – by requiring all employers, already liable to make compulsory monthly Pension Contribution(s), to also maintain a Group Life Insurance Policy in favour of each of their employees for a minimum of three (3) times the annual total emolument of the employee(s).

The premium for the Group Life Insurance Cover must be paid not later than the date of the commencement of the Insurance cover.

Where the death of an employee occurs with no Group Life Insurance Cover in place, the employer shall be directly and strictly liable to bear the death benefit claims of such a deceased employee’s Estate.

TAX EXEMPTION.

Contributions to the Uniform Pension Contributory Scheme are tax exempted; i.e., they are tax deductible expenses in the computation of the tax payable by the Pension Contributor.

Also, all interest, dividends, profits, investments, retirement benefits, etc, arising from and paid in accordance with the provisions of the 2014 Pension Reform Act or any other income accruable to Pension Funds and Assets, are also exempted from taxation.

PROTECTION OF PENSION FUNDS.

In addition to the express prohibition of Pension Fund Administrators (“PFA’’) retaining or dealing in Pension Assets, Pension Fund Administrators (“PFA”) are required to maintain a statutory Contingency Reserve Fund to meet any claim that such a PFA may become liable for. Subject to such Guidelines as the National Pension Commission (“NPC”) may issue, the Statutory Reserve Fund is required to be credited with 12.5% of the net profit after tax of each PFA.

Each PFA is also required to establish and maintain a Pension Protection Fund which Fund secures the benefits of eligible Pension Contributors under the 2014 Pension Reform Act.

Retirement Savings Account Holders, who have made their pension contributions for a number of years, shall be entitled to some minimum pension benefits as shall be specified in the Guidelines issued by NPC.

PENALTIES – PENSION CONTRAVENTIONS.

Any person, who without a Licence, carries on business as a Pension Fund Administrator (“PFA”) or as a Pension Fund Custodian (“PFC”), or whoever misappropriates or diverts Pension Funds, commits an offence and is liable on conviction to a fine of not less than N10Million (Ten Million Naira) for carrying on pension business without a licence; and a fine of an amount equal to three times the amount misappropriated in cases of Pension Funds and Assets misappropriated; or a term of imprisonment of not less than 10 (ten) years or to both the fine and the term of imprisonment.

Where the offence is committed by a corporate body, the fine must not be less than N50Million (Fifty Million Naira); with each Director and Officer of the offending corporation liable to a fine of N5Million (Five Million Naira) or to a term of ten (10) years or to both the fine and the term of imprisonment.

In addition to the fine and imprisonment, a Court of Law may order the forfeiture of the property, asset or proceeds of the pension contravention to the National Pension Commission (“NPC”). This is also in addition to the accrued interest attached to the proceeds of the unlawful pension activity and benefit.

PENSION DISPUTE RESOLUTION

As dispute is a part of human existence, a dissatisfied employee with a pension decision has the right to formally request the National Pension Commission to review a disputed decision. The National Pension Commission is required to ensure that it reaches a decision on any pension dispute without any delay.

Where the employee, the PFA or the employer is/are dissatisfied with a decision of the National Pension Commission, such dissatisfied party has the right to refer the dispute for resolution in accordance with the provisions of Arbitration and Conciliation Act, or to the National Industrial Court, whose decision shall be final and binding on the parties.

There is no Statute of Limitation to actions for the recovery of pension contributions, penalties and other benefits under the 2014 Pension Reform Act.

OBSERVATIONS

Increments in the rate of pension contributions by compliant employers will only further increase the cost of doing business and discourage new employment. This is especially as the level of compliance and enforcement with the provisions of the repealed 2004 Pension Reform Act was very, very dismal.

Also, there is a lacuna as to whether employers with more than three (3), but less than fifteen (15) employees, are mandatorily required to comply with the provisions of the Pension Reform Act, 2014. It is hoped that the NPC Guidelines when released, will provide some direction in this area.

The confidentiality provisions in this new Pension Law are reminiscent of draconian military decrees. These confidentiality provisions are also likely to conflict with the provisions of the 1999 Constitution (as amended) and the Freedom of Information Act.

Due to the average life expectancy in Nigeria being less than 55 years, commentators have seriously questioned the propriety of the retirement age of 60 years, as provided for in the Pension Reform Act, 2014. This is especially as the principal beneficiary of the Pension Scheme is the employee and not the employee’s estate on the employee’s demise

There are no protective whistle-blowers provisions in this legislation. In a country with a very high unemployment rate, many employers may continue to breach the provisions of the mandatory contributory pension scheme thereby inhibiting the ability of the scheme to be self-sustaining.

DISCLAIMER NOTICE

This is a free educational material which does not create a Client/Attorney relationship. Readers are advised to always seek professional legal advice to their specific situations from qualified Legal Practitioners. Questions, comments, criticisms, suggestions, new ideas, contributions, etc. are always welcomed. You can also visit our website http://www.oseroghoassociates.com for more legal materials.

INTELLECTUAL PROPERTY PROTECTED.

This material is protected by International Intellectual Property Laws and Regulations. This material can only be re-distributed for non-profit educational purposes only on the strict condition that our authorship is acknowledged, and the Disclaimer Notice is prominently displayed.

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