On Monday, August 21, 2017, the Lagos State Internal Revenue Service (LIRS) released a public notice (the LIRS Notice) on the voluntary pension contribution (VPC) tax relief. According to the LIRS, it will henceforth, only allow the VPC tax relief in the circumstance where there has been no withdrawal of such VPC from the respective retirement savings account (RSA), except in the following instances, that is, where the withdrawing employee:
- is above 50years old;
- who is below 50years old, is either:
- a retiree or unemployed on medical grounds; or
- unemployed, and has so been for a minimum period of 4 months.
The LIRS further threatened that, it will:
- periodically audit withdrawals of VPC with the respective Pension Fund Administrators (PFAs) and rely on the statutory provision on artificial or fictitious transactions in this regard;
- recover any tax that may be due from unauthorised withdrawals of VPCs, inclusive of penalty and interests, from employers under the PAYE scheme of Personal Income Tax (PIT) administration;
- use available judicial processes to defend its position with each taxpayer or employer; and
- require each taxpayer claiming VPC relief to submit alongside his or her income tax return, a copy of his or her RSA statement for the relevant tax year and any other period requested by the LIRS.
This piece briefly discusses the legal basis of the VPC tax relief and the legal issues that the LIRS Notice generates.
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