Tax & Business Matters - Nigeria

The Petroleum Industry Act: Insights Series

“The Stone Age didn't end for lack of stone, and the oil age will end long before the world runs out of oil.” - Ahmed Zaki Yamani, former Saudi Arabia Oil Minister.

This quote is a reminder that the future of oil will be very different from its present state, and that reality is already staring us in the face. In the intervening period, stakeholders must optimise the benefits from the sector while being strategic regarding energy transition into a future that is cleaner and sustainable.

Read our publication on the new “Petroleum Industry Act – Redefining the Nigerian oil and gas landscape” for insights and what it means for different sectors and key stakeholders.

The publication covers the following areas:

1. General overview of the industry
2. Energy transition and the future of energy
3. Upstream operations
4. Marginal field operations and local content development
5. Midstream operations
6. Downstream and services
7. Natural gas
8. Host community relations, sustainability and the environment
9. Investment and competitiveness
10. Deals, mergers and acquisitions
11. Monetary and fiscal policy
12. Banking, finance and insurance
13. Financial reporting, valuation and audit
14. Transfer pricing
15. Transition and implementation
16. Dispute resolution

Simply tap on your desired topic from the content page of the publication below to be directed to the section that matters to you. Download a copy of the publication and the new law below:

Publication: The Petroleum Industry Act Insights Series_August 2021

Copy of the signed Act: PETROLEUM INDUSTRY ACT 2021

Regulatory Framework & Guidelines on Mobile Money Services (MMS) in Nigeria

The Central Bank of Nigeria (CBN) has released the Framework on Mobile Money Services in Nigeria. The Framework incorporates an updated version of the previous Guidelines on Mobile Money Services in Nigeria. One of the objectives of the Framework is to set the minimum technical and business requirements for the various participants in the MMS ecosystem and highlights the obligations and responsibilities of the identified participants.

 

The Framework appears to have modified the document retention period under the Companies and Allied Matters Act. Participants are advised to review their processes and compliance framework to ensure they are up to date.

Read more in the tax alert below

Download Regulatory alert-Regulatory Framework & Guidelines on Mobile Money Services (MMS) in Nigeria

Africa Energy and Utilities Tax Guide

The beginning of a new decade presents an exciting future for the Oil and Gas industry. This will be shaped by technology, government policies and the state of the global economy. COVID 19 has been a disrupter and has significantly reduced demand for oil and gas. Final investment decisions on projects are on hold as companies are looking to manage their costs and cash flows.

The focus is largely to maintain current production levels with minimal investment and implement cost reduction strategies in the short to medium term. Uncertainty around government regulations has also contributed to the hesitancy to commit additional resources.

We have watched these industry developments and analysed the effects on key stakeholders. We have developed ways to help organisations prepare and manage changes, using our expertise and wealth of experience.

Find out more below

Africa Energy and Utilities Tax Guide 2020

VAT in Africa: Moving towards a united continent

Explore the application of VAT in 41 countries across Africa in our 2021 Africa VAT Guide. The publication examines the VAT laws, administration and practices in different countries on the continent. 

Download a copy here: VAT in Africa Report

FIRS issues circular on the requirements for Funds, Bodies and Institutions to receive tax deductible donations

In a recent circular (FIRS Circular 2021/02), the FIRS outlined the procedures for donations to Funds, Bodies and Institutions of a public character to be tax deductible in the hands of the donors.

Section 25 of the Companies Income Tax Act (CITA) provides that donations made to bodies listed in Schedule 5 of the Act, are tax deductible. The section also empowers the Minister of Finance to amend Schedule 5. Organisations that can be added to the list are those established in Nigeria which are of a public character.

The Minister subsequently issued Regulations that expanded the list, and highlighted some administrative procedures to certify eligibility of the institutions in the expanded list, to receive tax deductible donations. The circular seeks to clarify these matters.

Find out more in the Tax Alert below:

Download FIRS issues circular on the requirements for Funds Bodies and Institutions to receive tax deductible donations

FIRS issues clarifications on the operations of Real Estate Investment Companies (REICs) in Nigeria

The Federal Inland Revenue Service (FIRS) recently issued a circular (FIRS Circular 2021/17) to clarify the changes introduced by the Finance Act 2020 with respect to the taxation of Real Estate Investment Companies (REICs) in Nigeria. This circular updates an earlier circular issued in April 2020 on the same subject, based on the Finance Act 2019.

One key point identified in our previous tax alert was the issue of subjecting undistributed income to CIT in the hands of the REIC. This has now been addressed by Finance Act 2020, as a REIC’s total dividend and rental income will be CIT exempt where specified conditions are met.

Find out more in the Tax Alert below:

Download FIRS issues clarifications on the operations of Real Estate Investment Companies (REICs) in Nigeria

 

Lagos State Internal Revenue Service (LIRS) launches Service Charter

On 28 July 2021, the Lagos Internal Revenue Service (LIRS) released a Service Charter highlighting the LIRS’ mode of operations and services to be provided to taxpayers and other stakeholders. The Charter also underscores the rights, obligations and expectations of the LIRS and its stakeholders, with the aim of enhancing effective customer-friendly service delivery.

 

The Charter is designed to serve as a guide regarding the general administration of taxes by the LIRS, and is expected to boost trust and accountability between the LIRS and its stakeholders, especially taxpayers.

Find out more in the tax alert below:

Download Tax Alert – Lagos State Internal Revenue Service (LIRS) launches Service Charter

FIRS issues tax return guidelines for Free Zone enterprises

The Federal Inland Revenue Service (FIRS) recently issued a circular setting out guidelines for the filing of tax returns and other compliance obligations relating to approved enterprises within the export processing and free trade zones in Nigeria. These guidelines were issued following the Finance Act 2020 amendments to the Nigeria Export Processing Zone Act (NEPZA) and Oil and Gas Free Zone Act (OGFZA).

The circular clarifies that licences issued by the Authority or Management of a Zone are only valid within the relevant Zone. Tax laws will be duly applied on unapproved entities operating within Zones, or entities with expired or withdrawn licenses.

Find out more in the tax Alert below:

Download Tax Alert - FIRS issues tax return guidelines for Free Zone enterprises in Nigeria

Rivers State Issues new VAT Law

The historic legal tussle over the taxing powers of states and the Federal Government with respect to Consumption Taxes/VAT has been the subject of various conflicting decisions.

In the recent Ukala v. FIRS. (December 2020) and AG Rivers State v. FIRS & AG Federation (August 2021), the Federal High Court (FHC) in both cases held (among other things) that the constitution does not allow the Federal Government to make tax laws outside the taxation of incomes, profits, and capital gains.

In a related judgement in a case between AG Lagos State v. Eko Hotels & FBIR (2018), the national VAT Act was said to have "covered the field" and thus prevailed over the Sales tax law of Lagos state.

The latest judgment has culminated in the Rivers State Government enacting the state’s Value Added Tax Law No. 4 of 2021 on 19 August 2021. It is left to be seen how the impasse will be resolved, hopefully sooner rather than later.

Find out more in the tax alert below:

Download Tax Alert - Rivers State issues new VAT law

Download Rivers State Value Added Tax Law NO.4 OF 2021

10 things to note about the new Rivers State VAT law

Below are the highlights of the new VAT enacted by the Rivers State government. 

1. The Rivers State Value Added Tax Law 2021 was signed into law on 19 August 2021 by Governor Nyesom Ezenwo Wike
2. The tax is to be administered by the Rivers State Internal Revenue Service (RSIRS)
3. The rate of the tax is 7.5%
4. Section 16(2) requires an importer of taxable goods to pay the tax on the goods to the state before clearing the goods (it is not clear how this will be implemented)
5. Taxable persons are to register for the tax within 6 months of the commencement of the law or 6 months of commencement of business whichever is earlier. This means businesses which have been in business for at least 6 months are to register immediately while new businesses have up to 18 February 2022 to register. Note that it is illegal to charge the tax without registration.
6. Based on section 9, nonresidents are to register for the tax if they carry on business in the state
7. Monthly remittance and return is due by the 21st of the succeeding month in a manner specified by the RSIRS. This means the first return under the law will become due by 21st of September 2021
8. Any appeal against the decision of the RSIRS should be to the Tax Appeal Commission and subsequently to the State High Court. However, the Tax Appeal Commission has not been established.
9. The VAT revenue is to be shared 70% to the State and 30% to the Local Governments. 
10. The list of exempt items is similar to the old national VAT law including basic food items, medical services and educational materials. There is no registration exemption for small businesses unlike the N25m exemption under the national VAT Act

It is expected that Rivers State will no longer be entitled to a share of the national VAT pool.

Download Rivers State Value Added Tax Law NO.4 OF 2021