DealMakers AFRICA 2019 Annual

Nigerian tax developments

by Celia Becker

On 8 October 2019, the president presented the 2020 Budget proposal and Finance Bill to the national assembly. Significant proposed amendments included increasing the VAT rate from 5% to 7.5%, setting the annual VAT registration threshold at NGN 25 million in turnover, and expanding the VAT exemption list to include, inter alia, brown and white bread, cereals, fish, flour and starch meals, fruits, nuts, pulses and vegetables, roots, milk, meat and poultry products, salt, herbs, and natural and table water. The 2019 Finance Bill was signed into law by the president on 13 January 2020.


In June 2019, the president had assented to the Nigeria Police Trust Fund (NPTF) (Establishment) Act to be used to train, retrain and improve the general welfare of the personnel of the Nigeria Police Force, and to provide state of the art security equipment and machinery. Companies operating a business in Nigeria are obliged to contribute a levy of 0.005% of their net profit to the NPTF. Nigerian companies

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are already subject to other levies such as the tertiary education tax (2% of assessable profit), the national information technology development tax (1% of profit before tax) and other industry-specific levies such as the telecommunication levy on all network providers in the telecommunication industry (2.5% of net revenue), the Niger Delta development commission levy applicable to oil producing and gas processing companies operating onshore and offshore in the Niger Delta, and the cabotage levy applicable to vessels involved in coastal trade in Nigeria.

On 25 September 2019, as part of the revenue authority’s continued drive towards digitisation, the Lagos State Internal Revenue Service issued a public notice launching its Enterprise Tax Administration System (eTax), accessible from 1 October 2019, which aims to enable payments of all forms of taxes due to the Lagos State via the web and mobile channels. The Federal Inland Revenue Service (FIRS) held a demonstration of the electronic transfer pricing (e-TP) filing portal (to become operational this year) on 27 September 2019. The e-TP filing portal is to enable taxpayers to complete and submit transfer pricing declaration and disclosure forms, and country-by-country notification forms and reports.


The National Office for Technology Acquisition and Promotion (NOTAP), the agency responsible for the registration of all foreign technology transfer agreements having effect in Nigeria, also issued a public notice on 2 September 2019, announcing the automation of the technology transfer registration process. All new applications and renewals may now be processed via the NOTAP online portal.


The FIRS issued the Income Tax (Common Reporting Standard) (CRS) Implementation and Compliance Guidelines (the Guidelines) to supplement the income tax CRS regulations 2019, effective from 1 July 2019. The guidelines are based on the OECD handbook Standard for Automatic Exchange of Financial Account Information in Tax Matters and consist of the following three parts:

•     Part I: Preliminary information and the legal basis for issuance of the Guidelines;

•     Part II: General information on the CRS with respect to reporting and due diligence for Financial Account Information, as contained in Part II.B of the Standard for Automatic Exchange of Financial Information (AEOI) in Tax Matters; and

•     Part III: Specific commentaries on the CRS as contained in Part III.B of the OECD's Standard for AEOI in Tax Matters.


The Federal High Court of Nigeria recently ruled in the case of Ama Etuwawe Esq. v the FIRS and Guaranty Trust Bank Plc (the Bank) that it is unlawful for the FIRS to appoint the bank as its collecting agent to recover alleged companies income tax liability from Ama Etuwawe Esq.


Since 2018, the FIRS has been issuing letters to banks in Nigeria, appointing them as collection agents of taxpayers considered to be in default of tax payments, and directing the relevant banks to freeze the accounts of non-compliant taxpayers to prevent them from drawing funds from the accounts. In terms of section 31 of the FIRS (Establishment) Act, the FIRS is granted powers to appoint a person as an agent of a taxpayer for the recovery of tax payable by the taxpayer, by paying any tax due by such taxpayer from money held by the agent on behalf of the taxpayer. However, the provision does not define when “tax is payable” for the purposes of exercising the power to appoint an agent, and does not specify what must be presented by the FIRS to demonstrate to the agent that the tax is in fact due and payable. Concerns have been raised that the FIRS can arbitrarily allege that tax is payable and the agent may be obliged to withhold a taxpayer’s money even though the tax may be under dispute. The court’s judgment that such action by the FIRS is “unlawful, null and void” is a welcome relief for taxpayers.


The Federal High Court, on 3 October 2019, ruled in the case of The Registered Trustees of Hotel Owners and Managers Association of Lagos (RTHMAL) v the Attorney-General of Lagos State and FIRS that Lagos State has statutory authority to impose consumption tax on hotels and restaurants. The RTHMAL argued that the Hotel Occupancy and Restaurant Consumption Law and Regulations issued by Lagos State was not legal and valid and, accordingly, the state had no authority to impose the relevant consumption tax. However, the court disagreed on the basis that consumption tax falls neither under the Exclusive Legislative List, nor the Concurrent Legislative List, but is a residual matter on which states are empowered to legislate. The court also issued an injunction restraining the FIRS from imposing VAT on goods and services consumed in hotels, restaurants and event centres in Lagos State on the premise that, under law, Lagos State is the appropriate authority to assess such goods and services for a consumption tax.


Becker is an Executive | Africa regulatory and business intelligence | ENSafrica.