LRA Practitioner Training Module IX - PowerPoint Presentation

1. LRA Practitioner Training Module IXFiling, Payment and PenaltyLRAMonrovia 2021

2. CONTENTS1. Filing (Slides 4-16)2. Payment (Slides 17-21)3. Penalties (Slides 22-37)4. Interest (Slides 38-42)5. Tax clearance (Slide 43)

3. 1.1 Filing: Income tax filing requirementsA resident natural person who has taxable income is required to file an income tax return.However, a presumptive taxpayer and a resident natural person who derives 90 percent or more of gross income for a tax period from employment income is not required to file an income tax return.A presumptive taxpayer is required to submit a simplified form.A resident legal person, including trusts/estates, partnership and corporations is required to file an income tax return.A taxpayer who is not required to file an income tax return may elect to file an income tax return.Withholding agents are required to submit statement of the withholdingWithholding agents are also required to submit information report for payments to resident legal persons

4. 1.2 Filing: Excise, goods and services tax and real estate tax filing requirementsManufacturers of excisable goods are required to file an excise tax return for each tax period (i.e. Calendar Month)Manufacturers and service providers who are registered under the Goods and Services tax are required to file an goods and services tax return for each tax period (i.e. Calendar Month)Real estate owners are required to submit schedule of property after the acquisition of the property.

5. 1.3 Filing: Due dates of filing of tax returns A taxpayer’s return is considered to have been timely filed if it is received by the tax administration by the due date. Due dates of filing of various taxes are as follows:Excise return 21st of the following monthGST return 21st of the following monthCIT annual return 31st March PIT annual return 31st March Withholding statement 10th of the following monthInformation report for payments to resident legal persons-15th of the following monthSchedule of property for the purpose of real estate tax must be submitted within 30 days after the acquisition of the property.Tax returns are due no later than 5:00 p.m. on the due date.

6. 1.3 Filing: Due dates of filing of tax returns (proposed system) A taxpayer’s return is considered to have been timely filed if it is received at the taxpayer’s designated place for filing by the due date. Due dates of filing of various taxes are as follows:Excise return 21st of the following monthGST return 21st of the following monthCIT annual return 31st March PIT annual return 31st March Withholding statement 10th of the following monthInformation report for payments to resident legal persons-15th of the following month.Schedule of property for the purpose of real estate tax must be submitted within 30 days after the acquisition of the property.A taxpayer’s tax return is due no later than 11.59 pm in case of electronic channels and 5:00 p.m. in other cases on the due date

7. 1.4 Filing: Place of filing of tax returns Tax returns must be received on or before the due date in the LRA or its designated office.Taxpayers resident or domiciled outside Liberia and required to file a tax return may file the return at the place designated by the LRA for receiving returns in their country of domicile, or in the LRA office in Monrovia

8. 1.5 Filing: Method of delivery of filing of tax returns A tax return may be delivered by any method of delivery, provided it is received by the due date in the designated place.If a return is delivered to an official place of filing other than the taxpayer’s designated place of filing:it is not considered received at the designated place for filing until it is received in the correct office, or within 10 days after delivery (provided the taxpayer has proof that delivery was made), whichever is sooner.

9. 1.5 Filing: Method of delivery of filing of tax returns (proposed system)A tax return or tax payment may be delivered by any method of delivery, provided it is received by the due date in the designated place.

10. 1.6 Filing: Proof that delivery of return was madeA dated and time-stamped receipt issued by the designated place of filing and signed by a person who can be identified as an employee of the LRA at the designated place of filing on the date signed. A certified copy of an approved delivery service label that includes the following: the correct name and address of the designated place for filing; the signature of a recipient who can be identified as a LRA employee at the designated place of filing on the date signed; andthe date of receipt (or other information sufficient to establish the date of delivery). Approved delivery services are: DHL, EMS and any other services designated by the LRA.

11. 1.6 Filing: Proof that delivery of return was made (proposed system)Proof of timely filing is made by presentation of any of the following:A dated, stamped and signed receipt issued by the designated place of filing.A certified copy of an approved delivery service (i.e. DHL, EMS and any other services designated by the LRA) label showing the correct name and address of the designated place for filing; date and signature of recipient.In case of e-filing a copy of the confirmation email and the attached electronic form with the submission date shown.

12. 1.7 Filing: Extension of time to file tax returns A taxpayer can apply for an extension of time to file tax returns.Upon application in writing by a taxpayer, the Commissioner General may, where good cause is shown, extend the period within which a return is to be filed. The granting of a filing extension does not alter the due date for payment of the tax.

13. 1.8 Filing: Confidentiality of tax return informationA taxpayer’s tax return, the information contained therein, and any other information obtained from the taxpayer or about the taxpayer in the course of the tax collection, audit, investigation, or enforcement process is confidential.No officer, agent, or employee of the LRA and the LRA is permitted to disclose confidential information received in an official capacity except under the specified situation.Information concerning a taxpayer may be disclosed to another person with the taxpayer’s written consent.

14. 1.9 Filing: Disclosure of confidential information on tax returns to specified persons or agenciesWithout the taxpayer’s written consent, an officer, agent, or employee of the LRA may disclose confidential information on tax returns only to the following persons or agencies:Other agents or employees of the tax authorities in the course of and for the purpose of carrying out their official duties; Law enforcement agencies, for the purpose of the prosecution of a person who has committed tax violations or offenses; A court, in proceedings to establish a taxpayer’s tax liability, responsibility for tax violations or offenses, or in a criminal case; The tax authorities of a foreign country in accordance with international treaties or agreements; Government financial authorities of the Republic of Liberia to the extent necessary in administering the law on budget; The customs authorities, for purposes of administering the customs legislation, and also to authorities that have the right to administer taxes according to the LRC, for purposes of administering those taxes. To the administrator of the Extractive Industries Transparency Initiative (EITI) to the extent necessary for Liberia’s participation in and compliance with the EITI, including the publication of disaggregated reports that may identify payments by persons or projects.

15. 1.10 Filing: Duty of persons to whom information on tax returns is disclosedPersons who receive information about tax returns shall maintain secrecy regarding that information, except to the minimum extent necessary to achieve the object for which disclosure is permitted. Except for information received under the exceptions, a person who receives information the disclosure of which is regulated may not disclose the information and must return documents reflecting the information to the Commissioner General. Any person who discloses confidential information in violation is guilty of a criminal offense and, if convicted, is subject to a penalty of up to LD 800,000, a term of imprisonment of up to one year, or both.

16. 2.1 Payment: Due dates of payment of tax A tax payment is considered to have been made in a timely manner if it is received within the due date. Due dates for the payment of various taxes are as follows: Excise tax 21st of the following monthGST 21st of the following monthCIT 31st March CIT Quarterly Payment 15- April, July, October & JanuaryPIT 31st March PIT Quarterly Payment 15- April, July, October & JanuaryWithholding statement 10th of the following monthReal estate tax 1st JulyTax payments are due no later than 5:00 p.m. on the due date.

17. 2.1 Payment: Due dates of payment of tax (proposed system) A tax payment is considered to have been made in a timely manner if it is received within the due date. Due dates for the payment of various taxes are as follows: Excise tax 21st of the following monthGST 21st of the following monthCIT 31st March CIT Quarterly Payment 15- April, July, October & JanuaryPIT 31st March PIT Quarterly Payment 15- April, July, October & JanuaryWithholding statement 10th of the following monthTax Payments are due no later than 11.59 pm in case of electronic channels and 5:00 p.m. in other cases on the due date

18. 2.2 Payment: Extension of time to pay tax A taxpayer can apply for an extension of time to make tax payments.Upon application in writing by a taxpayer required to make a tax payment, the Commissioner General may, where good cause is shown, extend the period within which a tax payment can be made. While a taxpayer will not have to pay a penalty for delayed payment during the extended period, he will be required to pay the interest on delayed tax payments.

19. 2.3 Payment: Proof that payment was madeProof of timely payment is made by presentation of a dated and time-stamped receipt issued by the designated place of payment: indicating the amount of payment received, and signed by a person who can be identified as a Ministry employee at the designated place of payment on the date signed.

20. 2.3 Payment: Proof that payment was made (proposed)Proof of timely payment of taxes by a taxpayer depends where and how he chooses to pay the taxes as follows:In the case of payment of taxes at the LRA counter, presentation of dated, stamped and signed receipt issued by the designated place of payment;In the case of payment of taxes at the commercial bank, presentation of dated, stamped and signed receipt by the commercial bank;In the case of electronic payment, a printout of the system generated electronic receipt;  In the case of mobile payment, short message service (SMS) notification of payment.

21. 3.1 Penalties: General introductionTaxpayers are subject to penalties if they do not file and/or pay tax within due date or do not comply with other tax formalities such as registration, invoicing and book keeping.Financial penalties/fines for tax offences are imposed by the tax administration.Criminal penalties are generally imposed by public prosecutors/courts.Penalties are levied to encourage taxpayers to comply with their tax formalities in an accurate and timely manner.Penalties are not intended to generate revenue. Their main goal is to discourage non-compliance. So penalties must be proportional to the seriousness of the offence.Penalties for intentional tax evasion should be higher than simple unintentional mistakes.

22. 3.2 Penalties: Penalties under the LRCPenalties is levied on failure to file tax returns within due date. They are expected to work as a deterrent to any non- or late submission of tax returns.To encourage timely submission of returns the LRC includes provisions of penalties on any non- submission of returns within due dates.

23. 3.3 Penalties: Late filing penaltiesA taxpayer is subject to the late-filing penalty if a return is not filed by the required due date, including extension of time granted for filing.If the delay in filing is for not more than one month, the late-filing penalty is 5% of the amount of tax shown on the return. For each additional month (or partial month) that the delay continues, an additional 5% penalty is imposed on the sum of the tax shown plus any previously imposed penalty. The total penalty under this paragraph is not permitted to exceed 50% of the amount of tax shown on the return. If a late return shows no tax due, or if it is subsequently determined that there is no tax due, the taxpayer is subject to a flat penalty amount specified in Administrative Regulation N0. 01.51-1-16/LRA/DTD/17-03-2019

24. 3.3 Penalties: Late filing penalties – Non-tax dueAdministrative Regulation N0. 01.51-1-16/LRA/DTD/17-03-2019Taxpayer CategoryPenalty Large Taxpayers/Natural Resource Tax Payers USD 1000/monthMedium Taxpayers500/monthSmall Taxpayers 100/month

25. 3.4 Penalties: Late filing penaltiesLet us suppose that “ABC Company” failed to submit Goods and Services Tax Return of February 2021 on time and submitted it only on May 20, 2021. Its tax liability was LRD 45,000. In this case it will be subject to a late filing penalty of LRD 4,500 at the rate of 5% of tax liability each month as follows.Taxpayer: ABC CompanyAmount of reportable tax: LRD 45,000Due date for submission of statement: March 21, 2021Statement submitted on: May 20, 2021Late filing penalty: 5% of reportable tax for each month

26. 3.5 Penalties: Late filing penaltiesLate filing penalty is calculated as follows: Amount of reportable tax LRD 45,000Late filing penalty 5% for April LRD 2,250Late filing penalty of 5% for May LRD 2,250Late filing penalty for two months LRD 4,500

27. 3.5(a) Penalties: Failure-to-file penalty with tax due (proposed)This automatic penalty is 1% month  (for up to five months without compounding) of the amount of tax due that remains unpaid at the time of filing.

28. 3.6 Penalties: Penalty for willful failure to fileIf the taxpayer is convicted of willful failure to file a tax return in a criminal court proceeding as authorized under the Criminal Justice Law of Liberia:the penalty is doubled, and the taxpayer may also be subjected to a term of imprisonment of up to five years

29. 3.7 Penalties: Penalties for failure to pay under the LRCA penalty is levied on failure to pay tax within due date. It is expected to work as a deterrent to any non- or late payment of taxes.To encourage timely payment of tax dues, LRC has included provisions of penalties on any non-payment of tax within due dates.

30. 3.8 Penalties: Failure to pay amount shown If a taxpayer does not pay by that date, including extended period the amount shown as tax liability on the taxpayer’s return, a penalty is imposed. If the delay in payment is for not more than a month, the penalty is 5% of the amount of tax shown. For each additional month (or partial month) the delay continues, an additional 5% penalty is imposed on the balance.If the taxpayer makes a partial payment after the due date, the tax liability is reduced by the payment and for succeeding months the penalty is calculated based on the remaining unpaid balance. The total penalty should not exceed 25% of the amount of tax shown on the return.

31. 3.9 Penalties: Penalty imposed on net amountThe penalty is imposed on the net amount of unpaid tax amount shown on the returnIf the taxpayer is found to owe more tax than the amount shown on the return, the penalty is recalculated using the higher amount. If the taxpayer is found to owe less tax than the amount shown on the return, the penalty is recalculated using the lower amount.

32. 3.10 Penalties: Calculation of penalty for failure to pay Let us suppose that “XYZ Company” failed to pay its excise liability of LRD 90,000 for the month of February 2021 on time and paid it only on May 20, 2021. In this case it will be subject to a failure to pay penalty of LRD 9,000 at the rate of 5% of tax liability each month as follows.Taxpayer: XYZ CompanyAmount of reportable tax: LRD 90,000Due date for payment: March 21, 2021Tax paid on: May 20, 2021Late filing penalty: 5% of reportable tax for each monthPenalty is calculated as follows: Amount of due tax LRD 90,000Penalty 5% (for April) LRD 4,500Penalty 5% (for May) LRD 4,500Total penalty LRD 9,000

33. 3.11 Penalties: Penalty for willful failure to pay If the taxpayer is convicted of willful failure to pay tax in a criminal court proceeding as authorized under the Criminal Justice Law of Liberia:the penalty is doubled, and the taxpayer is also subject to a term of imprisonment of up to ten years.

34. 3.11 Penalties: Application of penalty due (proposed) Penalties shall only be applied to the amount due.

35. 3.12 Penalties: Taxpayer identification number related penaltiesIf tax withholding is required on a payment, and the payment amount is $1,000 or more, a withholding agent who makes a payment to a person who has not supplied a TIN is liable to pay a fine of $5,000 or the amount of the tax required to be withheld, whichever is less.If a person subject to tax to obtains more than one TIN, that person is liable to pay a fine of $1,000 per additional TIN obtained.If a withholding agent makes a payment to a person who has not supplied a TIN, or if a person subject to tax obtains more than one TIN, and is convicted of having acted deliberately or willfully to avoid the requirements of the tax law, that person shall be liable to pay a fine of not less than $200,000 nor more than $5,000,000.00 and to imprisonment for up to one year.

36. 3.12 Penalties: Taxpayer identification number related penalties (proposed)A fine of LRD10,000 for failure to obtain a TIN If a person obtains more than one TIN, that person is liable to pay a fine of LRD1,000 per additional TIN obtained.If tax withholding is required on a payment, and the payment amount is LRD1,000 or more, a withholding agent who makes a payment to a person who has not supplied a TIN is liable to pay a fine of LRD5,000 or the amount of the tax required to be withheld, whichever is less. If a withholding agent makes a payment to a person who has not supplied a TIN, or if a person subject to tax obtains more than one TIN, and is convicted of having acted deliberately or willfully to avoid the requirements of the tax law, that person shall be liable to pay a fine of not less than LRD 200,000 nor more than LRD 5,000,000.00 and to imprisonment for up to one year.

37. 4.1 Interest: Interest on late paymentLate payment or partial payment of tax is similar to unauthorized borrowing money from the government.It should be subject to interest, which is the monetary charge for the privilege of borrowing money.An interest is levied to protect the real value of tax revenue. If interest is not charged on late payment or if interest charged for late payment is lower than the market rate of interest, then there may be a tendency among taxpayers to use tax money to finance their commercial activities instead of taking loans from banks or other sourcesThe rate of interest applied is either fixed in law, or variable but linked to another prominent interest rate (normally defined by the national bank) or other variable.As per the LRC, the interest rate shall be the market rate as published by the Central Bank of Liberia, except as otherwise provided by LRC.

38. 4.2 Interest: Interest on overpayments and underpayments If any amount of tax is not paid by the due date, the taxpayer is obligated to pay interest, compounded monthly, at the specified rate on the unpaid amount for the period from the due date to the date the tax is paid. In the case of an overpayment of tax, interest, compounded monthly, at the specified rate shall be paid to the taxpayer from the date of the overpayment to the date on which the refund is made. Interest is not payable to the taxpayer if the refund is made no more than 45 days from receipt of the taxpayer’s application for a refund of the overpayment.

39. 4.3 Interest: Interest on late paymentThe interest charges continue to apply each successive month. They are raised on a monthly basis on the outstanding tax, penalty and interest for as long as the debt continues.

40. 4.4 Interest: Calculation of interest Example Let us suppose that "ABC Company" failed to submit its tax return for two months; did not pay its tax liability of LRD 45,000 for 2 months and the market rate as published by the Central Bank of Liberia during this period was 15%.In that case, it will have to pay its tax liability of LRD 45,000, late filing penalty of 5% each month for not submitting return, 5% penalty per month for being failed to pay due taxes and 15% interest per annum. Interest is levied on the sum of tax dues, late filing penalty, failure to pay penalty and accrued interest and calculated on a monthly basis as explained in the next slide.

41. 4.5 Interest: Calculation of interest example Calculation of Interest Amount of due tax LRD 45,000Late filing penalty 5% (for April) LRD 2,250Failure to pay penalty 5% (for April) LRD 2,250Total LRD 49,500Interest for April 15% annual (1.25%/Month) LRD 618.75If the debt remains unpaid, then taxpayer has a debt of:Amount of due tax LRD 45,000Additional charge (for May) LRD 2,250Penalty 5% (for May) LRD 2,250Interest for April LRD 618.75 Total LRD 50,119 Interest for May 15% annual (1.25%/Month) LRD 626.48Total interest (618.75 + 626.48) LRD 1,245.23

42. 5.1 Tax Clearance CertificateThe Commissioner General may by regulation require persons who are in specified categories of taxable persons to obtain a tax clearance certificate from the LRA.

43. END OF MODULE 9 ON FILING, PAYMNET AND PENALTIES Thank You!