Tax & Business Matters - Nigeria

Analyses of Nigeria’s 2016 Budget and Medium Term Expenditure Framework

On Tuesday 22 December 2015, President Muhammadu Buhari presented the 2016 Budget to the National Assembly. Described as “the Budget of Change” the President first gave an overview of 2015 performance before providing the 2016 budget highlights. We provide some insights on the key areas of the 2016 Budget and the Medium Term Expenditure Framework (MTEF) and Strategic Fiscal Plans for 2016-2018 earlier approved by the government.

See our Budget Bulletin below for details. Also available are the Budget Speech, the 2016 Appropriation Bill and MTEF 2016-18.

You can also watch my interview with Channels TV on the 2016 Budget here: Interview - 2016 Budget Analyses

Download Nigeria's 2016 Budget_PwC's Analyses and Insights

Download 2016BudgetSpeech by PMB

Download 2016AppropriationBill

Download MTEF 2016 - 2018

Happy holidays!

This is wishing all our esteemed readers, friends and followers a Merry Christmas and a most fabulous 2016.

President Buhari Presents 2016 Budget to National Assembly

The 2016 budget of the federal government of Nigeria has been presented to the joint session of the National Assembly. Below is the summary of the budget and highlights of the budget speech.

	N'trillion
2016 Budget (total spending)	6.08
Oil revenue	0.82
Non oil revenue	1.45
Independent sources (+others)	1.59
Deficit	2.22
	6.08

• The budget is predicated on 2.2m barrels of crude oil production per day at a benchmark rate of $38 per barrel and USD exchange rate of N197
• Total capital expenditure is N1.8 trillion which is 30% of the budget
• Key areas of focus include youth unemployment, social intervention for the vulnerable, diversification to build and reflate the economy, education, health, defense, infrastructure, farming and mining.
• Reduction in taxes for small businesses
• Employment of 500,000 new teachers
• Alignment of fiscal, monetary and investment policies
• Price of petrol pump price to remain at N87 “for now”
• Projected GDP growth rate of 4.37%
• Budget deficit will be financed through local and foreign loans

Federal High Court clarifies rules on taxation of foreign companies

The Federal High Court has clarified the rules on taxation of foreign companies operating through a fixed base or permanent establishment in Nigeria. In the past, the Nigerian tax authorities had taken the position in some instances that the business profits of foreign companies are derived from (and therefore taxable in) Nigeria regardless of whether the foreign company had a fixed base in Nigeria. Also in other instances where the FIRS established the existence of a fixed base, it imposed tax on the entire profits from the contract executed by the foreign company rather than only the profits attributable to the fixed base.

In this judgment the Court held that payments sourced from Nigeria without a tax presence in-country is not subject to Nigerian income tax. To be liable to tax, the foreign company must have a fixed base in Nigeria and the profits to be taxed are those attributable to the fixed base.

Here is our tax alert for further details and a copy of the ruling for your reference.

Download PwC Tax Alert_FHC Decision on Taxation of PE or Fixed Base (Dec2015)

Download Judgment - JGC Corporation v. FIRS (on PE)Nov2015

High Expectations as PIB Transforms into Petroleum Industry Governance and Institutional Framework (PIGIF) Bill

As recommended by various stakeholders, the 223-page Petroleum Industry Bill (PIB) which has been stalled for over 12 years has now been split into at least 2 separate bills. The first is a 45-page Petroleum Industry Governance and Institutional Framework (PIGIF) bill. It is expected that there will be at least one more bill to address the fiscal and taxation regime in the oil and gas industry.

Below are some of the key proposals in the PIGIF bill.

1. A new regulatory body will be established known as the Nigerian Petroleum Regulatory Commission (NPRC) to issue, renew and cancel licences, permits and authorisations among other functions.
2. Creation of 2 companies (the National Oil Company and the Nigerian Petroleum Asset Management Company) to replace the NNPC. The National oil company will operate as a commercial entity to be partly privatised (at least 30%). It will pay dividends from its operations to the federation account in addition to royalty and taxes. The Nigerian Petroleum Asset Management Company will own and manage petroleum assets on behalf of the government. It will be responsible for the management of the oil and gas assets that do not require cash calls (upfront funding).
3. Significant limits on the powers of the minister compared to the PIB. Board appointments will be made by the president and confirmed by the Senate.

The Minister of State for Petroleum recently estimated that Nigeria loses about US$15 billion annually as a result of failure to pass PIB into law. Other concerns in the oil industry which the proposed law seeks to address are lack of transparency, poor accountability, unclear roles of institutions, and weak regulations.

Expectations are high but no one should expect that this will be a quick fix. Complications may arise not from the content of the PIGIF but rather from what it does not contain such as the host community issues, local content and special provisions for indigenous petroleum companies.

It is not clear if government intends to continue with price regulation given the functions of the NPRC. Whether the new bill is a new dawn or business as usual, time will tell.

Below is a copy of the PIGIF bill for your reference and reading pleasure.

Download PIGIF Bill 2015

10 Reasons Why the Proposed 5% National Security Tax is a Bad Idea

... and the attempt to increase Tertiary Education Tax from 2% to 4% is misconceived while the planned re-introduction of highway tolling requires a re-thinking.

"We cannot address multiplicity of taxes by introducing new ones. Conventional wisdom suggests that if you are in a hole you should stop digging." - Taiwo Oyedele

Read my article in today's BusinessDay Newspaper pg9. I have uploaded copies of the article and the Bill below for your reference.

Download Security Tax Article_Taiwo Oyedele (Dec 2015)

Download National Security TAX BILL

PwC's 2016 Tax Academy: Curriculum and Registration

"An investment in knowledge pays the best interest” – Benjamin Franklin

Register for our 2016 Tax Academy (see curriculum and registration forms below).

Our training sessions are practical including panel discussions, case studies, interactive modules and walk-through scenarios. These are complemented by the use of visual aids and interactive learning tools. In addition we offer complimentary one-on-one Tax Clinic sessions to enable participants ask specific questions that they do not wish to raise during plenary.

Every participant who registers for the whole year and makes full payment not later 31 January 2016, will receive either a Mont Blanc pen with a power bank and a note pad; an Apple Watch with a note pad; or a laptop bag with a mouse, a power bank, a mouse pad and a note pad (depending on your choice and availability).

We also have consolation prizes for participants who register for a minimum of 6 months.

Download PwC's Business School_2016 Tax Academy Curriculum (Final)

Download 2016 Tax Academy Registration Form (Lagos)

Download 2016 Tax Academy Registration Form (Abuja & Port Harcourt)

For enquiry, please email [email protected] or visit http://www.pwc.com/ng/en/tax-academy-nigeria.html

Flaws of the Withholding Tax System in Nigeria (Part 1)

A survey conducted by PwC during a recent tax stakeholders’ event revealed that sixty percent of taxpayers consider withholding tax as the most complex aspect of tax compliance in Nigeria.

“…the process of obtaining refund is not only rigorous but almost impossible in practice. Taxpayers are subjected to intensive audits and even when the claims are certified, refunds are rarely granted. As a matter of fact, Arsenal has a higher chance of winning the Champions League than a taxpayer obtaining a WHT refund.”

Read the article written by Funmi and Bitrus (both of PwC) which was published today in the Guardian Newspaper (copy uploaded below).

Download Flaws of the WHT system in Nig_7Dec2015