Professional services firm KPMG has raised concern over Nigeria Government’s introduction of the Expatriate Employment Levy (EEL) commending the policy’s potential to attract nationals in the diaspora, while questioning whether the expected benefits of the EEL could outweigh the cost.
Adewale Ajayi, partner & head of the tax, regulatory and people services at KPMG proposed an assessment of the policy saying it will provide the relevant information on the revenue potential of such levy, the related cost, and the impact on businesses.
“Undoubtedly, Nigeria has a revenue challenge. It is, therefore, understandable that government will explore every avenue to enhance its revenue sources. However, it is always important to find the right equilibrium between revenue generation and economic growth. Otherwise, the country will not achieve sustainable growth,” Ajayi said in the March 2024 note issued by the firm.
KPMG noted in the publication that despite assurances from the Presidential Committee on Fiscal Policy and Tax Reforms that no new taxes would be introduced, the sudden imposition of the levy has raised concerns about the implication on business operations in Nigeria.
“It is always important that such significant policy change is supported by an enactment of the National Assembly. Also, the timing of reforms is extremely important. Given the headwinds facing businesses now, this may not be the best time to introduce such a levy. Otherwise, the current challenges will be exacerbated and may result in disruptions to business operations,” Ajayi said.
On the government’s decision to denominate the levy in US dollars instead of Nigerian naira, Ajayi expressed fear that it could exacerbate currency exchange challenges and inflation rates.
“The EEL may potentially impact many organisations negatively, especially as it is already challenging to sustain the payment of the $2,000 statutory fee to obtain residence permits (CERPAC forms) for non-ECOWAS nationals annually, given the current foreign exchange challenges in the country,” he said.
“It is interesting to note that payment for a residence permit is made in its naira equivalent. As of the time of this publication, a CERPAC form costs ₦3,196,000 (exclusive of bank commission. of N5,000). The annual naira equivalents of the EEL are ₦16,000,000 and ₦23,000,000 per non director and director level expatriate respectively, based on the prevailing exchange rate.”
He held that if the government favours the payments to be made in naira, it could help address this issue of dollarising the economy.
“While stakeholders await more clarity on the implementation of the EEL, organizations with expatriates who meet the eligibility requirements need to urgently take proactive action to review the impact of this development on their businesses and take appropriate action to avoid penalties that may arise from non-compliance,” Ajayi noted.
In February, President Bola Tinubu launched the Expatriate Employment Fund (EEL), an initiative to check the influx of expatriates, curb insecurity and raise funds.
The policy meant that businesses that employ expatriate workers in Nigeria are to $15,000 (N24 million) beginning March 15, 2024.
The fees, documented in a handbook released by the ministry of interior, says that employers will be required to pay $15,000 for expatriates at the director level and $10,000 for those at other levels annually. The levy is an ad valorem and will be based primarily on the offshore earnings of expatriates working in Nigeria.
The EEL will serve as a mandatory document, like a passport that expatriates will be required to present to be allowed exit or entry into Nigeria. Employers are required to register their expatriate employees through an online reporting portal, before April 15, 2024.
The document also reveals penalties for non-compliance with the policy including imprisonment for up to 5 years or fines ranging from ₦1,000,000 for inaccurate or incomplete reporting to ₦3,000,000 for various offences such as failure to file, register, or renew the EEL within specified timeframes, as well as submitting forged information.
According to the government, the Project will be operated on a Public Private Partnership (PPP) model between the Federal Government of Nigeria (FGN) represented by the Federal Ministry of Interior (FMI) as the guarantor while the Nigeria Immigration Service (NIS) will oversee its implementation.
The levy seeks to promote skills transfer and knowledge sharing, balance economic growth and social welfare, enhance collaboration between public and private sectors and address demographic shifts
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