The Securities and Exchange Commission (SEC) has begun collecting income tax on bonds and short-term assets.
This came after a 2012 verdict that exempted bonds and short-term securities from Company Income Tax (CIT) for the previous ten years expired.
In 2012, the federal government extended a tax exemption to all bonds and debt instruments issued by all levels of government and corporations.
However, the timing may raise questions. Some experts believe it may discourage investors from entering a space that has been facing liquidity challenges.
Nevertheless, SEC has reminded all fund managers that they must pay the Commission an annual supervisory charge.
This was revealed in an SEC circular, which states that all fund managers must pay the annual supervisory fee to the Commission by the 31st of January of each year.
The circular further noted that the payment of the yearly supervisory fee for 2021 will be based on the NAV value as of December 31, 2021.
What the SEC is saying
According to the SEC, “The Commission hereby draws the attention of all registered Fund/Portfolio Managers to the SEC Rule on Annual Supervision Fees for Collective Investment Schemes (CIS) and Regulatory Fees for Discretionary and Non-Discretionary Funds/Portfolios issued on January 21, 2021, and the amendment thereto issued on December 20, 2021, which provides that: the payment for 2021 annual supervisory fee shall be based on the value of Net Asset Value (NAV) as of December 31, 2021, and Annual Regulatory fee for Discretionary and Non-Discretionary Funds/portfolios.”
The Annual Supervisory Fee for Collective Investment Schemes (CIS) under Management, according to the Circular, will be 0.2 percent of the Net Asset Value (NAV) of each CIS under management, computed and accrued daily for each CIS.
On Annual Regulatory Fees for Discretionary and Non-Discretionary Funds/Portfolios, the SEC specified that every Fund/Portfolio management shall pay the Commission’s annual regulatory fees no later than the 31st of January of each year.
“The fees are 0.25percent of the NAV of all discretionary and non-discretionary funds/portfolios (other than CIS) under the management of the Fund/Portfolio manager for retail investors and 0.01percent of the NAV of all discretionary and non-discretionary funds/portfolios (other than CIS) under the management of the Fund/Portfolio manager for qualified investors.”
“Accordingly, Funds/portfolio managers should note that late payment will attract a penalty of N100,000 and a daily sum of N5,000 for every day of default, or such other stiffer penalty as the Commission may determine,” the Circular added.
What experts are saying
Akeem Akorede, ALM Analyst at Coronation merchant bank stated that the SEC fee came as a shock to the Nigeria fixed income market. He mentioned that the Fixed income market has seen a significant drop in market capitalization. He said, “The New SEC fee came as a shock to market participants in December. There have been several engagements amongst market stakeholders considering the effect the policy would have on market activities. We have seen a significant drop in market capitalization of the Fixed income market in the last 2 years with the market closing on a quiet note for several days. We would watch out for investors’ reactions in the secondary market this week. The holders of the financial asset would still have to pay custody fee on the assets.”
He also added that “The move by FMDQ to harmonize the charges and remit to SEC is a welcome development, and we believe the exchanges would continue to engage the market on the way forward.”