Overview of CITN Statement of Taxation Standards (STSs)4 – Previously Agreed Tax Return Filing Position

Statement of Taxation Standard (STS) 4: Previously Agreed Tax Return Filing Position

Introduction

The CITN Statement of Taxation Standard (STS) Four on Previously Agreed Tax Return Filing Position sets out the applicable standards for members of the Institute in recommending a tax return position that departs from the position determined in an administrative proceeding or in a court decision with respect to the taxpayer’s prior return.

For the purposes of this guidance an “administrative proceeding” includes any ruling arising from the Tax Appeal Tribunal (TAT) or from examination by any tax authority of a tax return in the course of an enquiry, determination or assessment by the tax authority of a tax position in relation to a return or a claim for refund, tax offset or carry forward of tax credit. It also includes authority having jurisdiction over tax matters, and the Tax Appeal Tribunal.

Where an administrative proceeding or the court ruling has given a decision in the treatment of a specific item, in the prior year’s return, such treatment will usually be recommended by a member in the subsequent periods. However, a departure from the consistent treatment may be justified in the following circumstances:

1. The decision of the administrative proceeding or court decision may have arisen due to lack of documentation. However, such information/documents may be available in the subsequent years.
2. The taxpayer may have conceded in the administrative proceeding for settlement or not have appealed the court decision, may be due to time, resources etc even when the position is realistically possible to defend.
3. A recent court decision, ruling or other authorities that are more favourable to the taxpayer’s position may have arisen after the administrative proceeding or a court decision.

CITN Statement of Taxation Standard (STS) Four was issued and gazetted in the Federal Republic of Nigeria Official Gazette Vol. 100 of June 2013. The standard became effective from 1^st January 2013. The Standard is divided into five sections:

1. Part 1 (One)- The introduction
2. Part 2 (Two)- Explanatory Notes
3. Part 3 (Three)- Taxation Standard
4. Part 4 (Four) – Compliance with Legal Requirements
5. Part 5 (Five) – Effective Date

Parts 1, 2 and 3 present the standards, Part 4 requires compliance with any disclosure requirement of the Companies Income Tax Act CAP C21 of the Laws of the Federation of Nigeria 2004 as amended to date, the Personal Income Tax Act and any other relevant laws. Part 5 discloses the effective date of the Standard, which is 1 January 2013.

Guidance on STS Four

1. The tax return position determined in an administrative proceeding or court decision should not restrict a member from recommending a different tax position in a later year’s return, unless the taxpayer is bound to a specified treatment in the later year, such as by a formal closing agreement. Therefore, the member may recommend a tax return position or prepare and sign a tax return that is different from treatment of the item in the administrative proceeding decision or court ruling, provided that the requirements of STS Two: Tax Returns Position are satisfied.
2. The consent in an earlier administrative proceeding and the existence of an unfavourable court decision are factors that the member should consider when advising a client on tax return filing positions.

Conclusion

It is logical that where a tax authority has denied a tax payers’ position on a prior return(s), members of the Institute should desist from taking that same position on subsequent returns, pending when the leading circumstances that led to the administrative or court position has changed.

Members and stakeholders are invited to visit https://app.citn.org/home/tpgs to download the CITN Statement of Taxation Standards 1-9, and the Institute’s Professional Rules and Practice Guidelines.