Reviewing a client's refund claim before it is lodged
What a firm should check in a Nigerian client's tax refund claim before it is lodged, given the NRS penalties for false or fictitious claims.
By Achekam · · 5 min read · For Accountants & audit firms in Nigeria
Refund claims attract optimism. A client sees a large excess of input VAT, or believes it overpaid company income tax, and wants the money back quickly. The schedule it sends the firm is a total and a sentence of explanation. The temptation is to format it neatly, attach what the client provided and lodge it.
That is the wrong instinct. A refund claim is a request for public money, and the NRS has set out penalties for claims that turn out to be false or fictitious. Before a claim leaves the firm, it deserves the same scrutiny as an audit opinion: is there a ground, is it in time, and can every figure be proved?
The penalties for false or fictitious claims
In its Guidelines on Tax Refund, the NRS sets out a penalty table. As that table reads, obtaining a VAT refund through a false or fictitious claim attracts a penalty of 100 per cent of the VAT amount refunded, plus interest at the prevailing Central Bank of Nigeria Monetary Policy Rate. Obtaining any other tax refund through a false or fictitious claim attracts 50% of the amount refunded, plus interest at that rate.
Separately, the NRS warns on its penalties page that providing inaccurate or misleading information can lead to severe penalties, including prosecution. A refund claim is information provided to the NRS, so both warnings apply. The NRS's Guidelines on Tax Refund set out the grounds, the application process, the time limits and the penalty table, and the reviewer should have them open while reviewing any claim. Penalty rates are as stated in the guidelines at the time of writing.
The penalty falls on the claimant, but a firm that lodged a claim it had not tested has a professional problem of its own.
Is there a recognised ground?
The guidelines list the situations in which a taxpayer is eligible for a refund. Among them:
- tax paid exceeds the amount due for the year of assessment;
- tax was overpaid because of an assessment error;
- tax was paid twice or in error;
- input VAT exceeds output VAT;
- VAT was charged and remitted on zero-rated and exempt supplies;
- withholding tax was remitted at rates higher than the statutory rates.
The first review question is which of these the claim relies on. A claim that cannot be matched to a ground needs more work before it goes anywhere. A claim that relies on more than one ground should separate the amounts, because each ground needs different evidence. Eligibility is covered more fully in who is eligible for a tax refund.
Time limits for VAT and other refunds
The guidelines say a VAT refund request must be submitted within 12 months from the date of the transaction that generated the claim, otherwise the right to the refund is forfeited. The guidelines do not cite the section of the Act for that limit, but the consequence is stated plainly.
For a VAT claim built from many transactions over a long period, test the dates. Transactions older than the limit should be removed from the claim, not left in on the hope that nobody checks. For other taxes, confirm the time limit that applies before lodging.
Evidence and the signed declaration
The guidelines describe what an application must contain. It is made through the NRS tax administration solution, or by an application to the Executive Chairman of the NRS, giving the applicant's name and Tax ID, the basis of the claim, the tax type, the amount, the period and nature of the transactions, and a declaration signed by the individual applicant or by a director, principal officer or authorised officer of the entity, with supporting documents attached. VAT refund applications go instead to the relevant Executive Director.
The declaration is the point where the client takes personal responsibility. Make sure the person signing understands what they are declaring, and that the claim they sign is the one the firm reviewed.
Collecting the evidence and the client's approval
The evidence a refund needs is usually scattered: invoices, payment receipts, assessments, bank statements, withholding certificates. In Achekam, staff can create, send and track requests to the client for documents, answers and confirmations in one RFI console. Raise one request per evidence gap, so the file shows exactly what was asked for and what came back.
File the evidence, the draft claim and the final claim as lodged in the client's folder in the Document Centre, where versions are kept and documents can be tagged and searched. If the NRS later questions the claim, the firm can show the version the client approved and the evidence behind each figure.
Where the refund arises from a Nigerian tax return prepared in Achekam, such as a VAT return showing excess input tax, a reviewer can send the approved return to the client for e-signature with a summary PDF, and the signature is recorded as the client's approval. The summary never includes the firm's working papers. That gives the firm a clear record that the client approved the figures before anything was lodged. The lodging steps themselves are covered in applying for a tax refund.
A reviewer's checklist
Before a claim is lodged, the reviewer should be able to tick every line:
| Check | Evidence on file |
|---|---|
| The ground is one the guidelines recognise | Note naming the ground for each amount |
| The claim is within its time limit | Transaction dates tested; old items removed |
| Each figure agrees to source documents | Invoices, receipts, assessments, certificates |
| The amount is arithmetically correct | Reconciliation from source to claim total |
| The application contains every required detail | Name, Tax ID, basis, tax type, amount, period, nature |
| The right person will sign the declaration | Name and role of the signatory |
| The client has approved the final version | Signed approval on file |
Any line that cannot be ticked is a reason to hold the claim.
Make this checklist a required step for every refund claim the firm prepares, with a reviewer who did not prepare the claim. Then look back at the last claim lodged and test it against the list; if anything is missing, raise it with the client now.
General guidance only, not advice on your own circumstances. Tax and payroll rules change: check the current position with the authority or your adviser.