The Lagos State Internal Revenue Service (LIRS) on Tuesday, 23rd February 2021, issued a public notice providing clarifications on issues relating to definitions of terms and obligations of landowners, particularly owners and/or managers of hotels, event centers, restaurants, and other facilities of their obligations as Consumption Tax Collecting Agents for the State Apex Tax Authority.
The HORC Law 2009, is designed to impose a tax on goods and services consumed in hotels, restaurants, and events centers within the territory of Lagos State. It has a commencement date of 22nd June 2009 and empowers the LIRS to administer, collect and enforce this law, in line with the Lagos State House of Assembly Legislation or Acts of Parliament.
Highlighted below are some of the key points to note:
1. Section 17 of the Hotel Occupancy and Restaurant Consumption Tax (HORC) law (2009) describes a Hotel Facility and Event centers as follows:
‘Hotel Facility’ Includes a room, suite, hall, open space, or other facility or resource center which may be let out for a fee within a hotel OR other facility, under a lease, concession, permit, right of a license, contract, or other agreement.
This includes short-let apartments, playgrounds, and any other facility available for use for a fee under a lease or permit.
‘Event Centres’ include all halls, auditoriums, fields, and places designated for public use, at a fee.
‘Restaurant’ includes any food sale outlet, bar, tavern, inn, or café whether or not located within a hotel. This includes
supermarket food courts/food section and delis with or without a sit-in facility whether or not located within a hotel.
2. The management of these establishments defined above are therefore obligated by law to charge, deduct and remit their monthly consumption tax, file monthly returns, and perform all other duties as detailed in the HORC Law 2009.
3. The monthly filing of returns in respect of this Law, is to be done using the HCL 1 form as enshrined in Section (1b & 2) of the HORC Law 2009.
These Sections of the Law emphasize the obligation of the taxpayer/collecting agent to file returns stating the total amount of payments made for all chargeable transactions, amount of tax collected and any other information required by the Agency for each reporting period.
Each calendar month is a reporting period and the taxes imposed and collected under this law are due and payable on or before the 20th day of each calendar month.
The filing of these returns shall be enforced – this has been clearly stated!
Henceforth, the filing of the monthly returns shall be strictly enforced and the full weight of the law shall be visited on erring proprietors.
4. All collecting agents must ensure that their bills/invoices detail the breakdown of taxes charged on their sales. The receipts must carry the amount of Consumption Tax charged for each sale that is made on the consumption of their goods, services and use of their facilities.
All affected parties are to ensure that they adhere to these tax laws as the Lagos State Government has resolved to enforce the law to the letter.
Implications for those affected:
• The tax due is not borne by the collecting agents or owners of these businesses as referenced above. However, the law imposes the responsibility to accurately collect and remit this tax by the collecting agents or owners of the affected businesses.
• The tax so imposed is on any person – the Consumer, who pays for the use, consumption or possession or for the right to the use or possession of any hotel, hotel facility or events center or purchases consumable goods or services in any restaurant whether or not located within a hotel in Lagos State.
• Internally generated revenue by way of taxes has always been a key focus area for several government administrations in Lagos State. Thus, LIRS would be paying close attention to affected collecting agents or owners of such businesses who fail to comply with the provisions of the law.
We, Vi-M Professional Solutions are available to assist you to review your business and work with you to ensure compliance. Should you already be facing a tax audit on this subject or any other tax audit, do let us know and we would be glad to provide you with the necessary professional assistance so that you can
concentrate on your core business operations.
Please note, that the conclusions and recommendations provided in this article are based on our understanding of the facts, assumptions, information, and enabling legislation referenced herein, which are subject to change.
If the facts and assumptions are incorrect or change or the tax laws change, the conclusions and recommendations would likewise be subject to change. This article is not intended to be a formal opinion on this subject or any other tax area, and, thus, may not contain a full description of all the facts or a complete exposition and analysis of all relevant tax authorities.
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