Tax & Business Matters - Nigeria

A new list of approved pioneer industries and products has been published

You may already be aware that the federal government of Nigeria recently embarked on a review of the pioneer incentive scheme in order to address identified lapses, abuse and loopholes.

Under the scheme, eligible companies are exempted from income tax for 3 years which may be extended for one or two years.

The Ministry of Industry, Trade and Investment has now released a list of 44 industries and products that are eligible for the pioneer status. The gazette dated 27 May 2015 essentially reproduced the list of industries and products as approved by the Council of Ministers in 1989. This implies that all the industries and products that were added to the approved list within the past 26 years since 1989 are no longer eligible for the incentive.

I have uploaded a copy of the gazette below for your information and reference.

Download Pioneer Industries & Products_Official Gazette 

Nigerian Court says VAT is not applicable on packaged water

Apparently nothing is straightforward in matters of taxation.

According to the VAT law, basic food items are not liable to VAT. However, the law fails to define or provide a list of what constitutes basic food items. There has been a long standing dispute between the FIRS and some water bottlers as to whether bottled water is a “basic food” item given that it must have undergone some processing and packaging. FIRS also argued that packaged water is a luxury item which, in their view, the law did not intend to exempt from tax.   

The Federal High Court has ruled that water is a basic food item and therefore exempt from VAT regardless of whether it has been processed or packaged.

Read our alert for further insights on the issue. I have also included a copy of the court judgment for your reading pleasure.

Download PwC Tax Alert_VAT on Packaged Water

Download FHC Judgment_VAT Exemption on Packaged Water

PwC secures a landmark TAT decision in a VAT case on imported services

We have assisted one of our clients to obtain a ruling at the Tax Appeal Tribunal to the effect that VAT is not applicable on imported services rendered by a foreign company outside Nigeria. To the extent that the foreign provider is not carrying on business in Nigeria, there is no legal obligation to register for, or charge Nigerian VAT. Also, a Nigerian company that has not received a VAT invoice from the foreign company is not required to self-charge VAT.

This decision provides some clarity on the often disputed position of the FIRS that a Nigerian company should self-charge VAT on services received from a foreign entity even when such provider is not carrying on business in Nigeria.

Download PwC Tax Alert_VAT on imported services

Download TAT decision_VAT on Imported Services

New Court of Appeal judgment on excess dividend tax and restriction of capital allowance

The Nigeria’s Court of Appeal has upheld an earlier judgment of the Federal High Court and the Body of Appeal Commissioners regarding the restriction of capital allowance that may be claimed by a company that is not fully engaged in agro-allied or manufacturing activities.

The judgment also sustained the existing decision of the court on “Excess Dividend Tax” on the basis that the dividends in question were paid out of profits which had not been taxed.

Read our alert and a copy of the judgment for details.

Download Tax Alert_Court of Appeal Decision on Capital Allowance and Excess Dividend Tax

Download Court of appeal ruling on CA & EDT_Mar 2015

Nigeria joins the OECD Convention on Mutual Administrative Assistance in Tax Matters

The Nigerian government recently ratified the Convention on Mutual Administrative Assistance in Tax Matters, an initiative of the Organisation for Economic Cooperation and Development (“OECD”). The Convention is designed to facilitate exchange of information on tax matters between the tax jurisdictions of the signatory countries. Nigeria signed the Convention in 2013 and ratified it in April 2015.

The ratification of the Convention is a significant step in the administration of taxes in Nigeria. This is likely to give the Federal Inland Revenue Service (“FIRS”) new lines of enquiry about the tax affairs of multinational companies operating in Nigeria. It also means that the FIRS must surrender itself for peer review and must meet a minimum standard of tax administration by global benchmark.

See our alert below for further insight on the subject.

Download Nigeria & OECD Convention on Mutual Administrative Assistance

Also available is our tax calendar for June 2015 for your use:

Download Tax Calendar_June 2015