Tax & Business Matters - Nigeria

Nigeria's Tax Summaries - Tax Data Card 2021

We are pleased to share PwC's 2021 Tax Data Card, a summary of the major tax and related regulations in Nigeria. The publication has been updated to include new changes introduced via the 2019 and 2020 Finance Acts as well as the new Petroleum Industry Act, 2021.

This edition is interactive making it easier for you to navigate. Simply tap on any topic from the content page to access the relevant pages.

This edition covers the following:

1. Capital Gains Tax (CGT)
2. Companies Income Tax (CIT)
3. Information Technology Tax (IT Tax)
4. Personal Income Tax (PIT)
5. Petroleum Industry Act (PIA)
6. Petroleum Profit Tax (PPT)
7. Tertiary Education Tax (TET)
8. Withholding Tax (WHT)
9. Double Tax Treaties (DTT)
10. National Agency for Science & Engineering Infrastructure (NASEMI) levy
11. Nigeria Police Trust Fund (NPTF) levy
12. Customs and Excise Duties (C&E)
13. Stamp Duties (SD)
14. Value Added Tax (VAT)
15. Employee Compensation Scheme (ECS)
16. Industrial Training Fund (ITF)
17. National Housing Fund (NHF)
18. Pension Contributions
19. Local Content Regulations (Cabotage, ICT, Oil & Gas, Power sector)
20. Nigeria Export Processing Zone Act (NEPZA)
21. Pioneer Status Incentives (PSI)
22. Road Infrastructure Tax Credit Scheme  (RITC)

Download PwC - 2021 Nigeria Tax Data Card

FIRS Circular on taxation of insurance companies

The Finance Act (FA) 2020 introduced certain amendments to the taxation of insurance companies. Consequently the Federal Inland Revenue Service (FIRS) issued an information circular dated 3 June 2021, to provide guidance on the implementation of Finance Act amendments. The circular replaces the earlier FIRS circular issued on 29 April 2020.

We examine some of the tax law changes and other issues clarified in the recent FIRS circular below:

Download Tax Alert - FIRS Finance Act Circular- Taxation of insurance companies

FIRS Circular on Sundry Changes including tax exemption for SMEs

The Federal Inland Revenue Service (FIRS) issued a circular to clarify some of the changes to the Companies Income Tax Act (CITA) introduced by the Finance Act (FA) 2020.

Small companies and CIT - Small companies with gross turnover not exceeding N25 Million are exempt from CIT. FIRS listed the conditions necessary for getting exemption from tax and stated that a small company which defaults in meeting the conditions shall be liable to penalties. FIRS reserves the power to assess the small company to an administrative or best of judgment (BOJ) assessment where the company refuses to file CIT returns as and when due.

Small companies and TET - The amendment to the TET Act now expressly clarifies that small companies are not liable to TET.

Find out more in the tax alert below:

Download FIRS Circular on Sundry Changes

FIRS issues clarifications on the Capital Gains Tax (CGT) Act

The Federal Inland Revenue Service (FIRS) recently issued an information circular to provide clarification on the Capital Gains Tax (CGT) Act as amended by the Finance Act 2020.

The circular provides the following guidance:

Ships or Aircraft used in International Traffic - That the right or interest in a ship or an aircraft used in international traffic is situated where the owner or person with beneficial interest is resident. Consequently gains from the disposal of the ship or aircraft or the right or interest in the ship or aircraft used in international traffic is chargeable to CGT in Nigeria, irrespective of the location of the ship or aircraft at the time of the disposal, if:
a) the owner of the ship or aircraft is resident in Nigeria;
b) or a resident of Nigeria owns an interest in or right over the ship or aircraft.

Ships and Aircraft not used in International Traffic - A ship or an aircraft used in Nigeria for purposes other than international traffic (whether or not the ship or aircraft is physically situated in Nigeria) is a tangible movable property. The disposal of such a ship or aircraft is chargeable to CGT in Nigeria, irrespective of whether the owner of the asset (or interest in the asset) is a resident of Nigeria or non-resident or whether the disposal took place in Nigeria or not.

Find out more in the tax alert below:

Download Tax Alert - FIRS issues Guidelines for the Clarifications of Capital Gains Tax (CGT) Act

FIRS circular on the implementation of VAT changes in the Finance Act, 2020

The Finance Act (FA) 2020 introduced certain amendments to the Value Added Tax Act (VATA). The Federal Inland Revenue Service (FIRS) recently issued an information circular dated 3 June 2021, to provide guidance on the implementation of Finance Act amendments to the VATA. The circular replaces the earlier FIRS circular issued on 29 April 2020.

We examine some of the tax law changes and other issues clarified in the recent FIRS circular below:

Download Tax Alert – FIRS circular on the implementation of VAT changes in the Finance Act 2020

PwC Insights on FIRS Circular on Taxation of Seafarers and Platform Workers

The Federal Inland Revenue Service (FIRS) has issued an Information Circular on the taxation of Seafarers and Platform workers including guidance on their residence and taxation in Nigeria.

 

Based on the circular, an individual will be described as tax resident in Nigeria, if he/she:

1. has a permanent place available for his domestic use in any part of Nigeria;
2. is in Nigeria for a period or periods amounting to an aggregate of 183 days (inclusive of annual leave or temporary periods of
   absence) or more in any twelve-month period; or
3. serves as a diplomat or diplomatic agent of Nigeria in another country.

Find out more in our Tax Alert below.

Download Tax Alert on FIRS Circular on Taxation of Seafarers and Platform Workers

CBN issues Guidelines on shared services for financial institutions

The Central Bank of Nigeria (CBN) in May 2021 issued its Guidelines for Shared Services Arrangements (SSAs) for Banks and Other Financial Institutions (the Guidelines), to complement the CBN’s Guidelines for Licensing and Regulation of Financial Holding Companies in Nigeria.

The Guidelines, which are mandatory for all institutions licensed by the CBN, require full compliance by 1 June 2022 and set out the operational standards for banks and other financial institutions looking to set up or participate in SSAs. The Guidelines also seek to ensure compliance with Executive Order 5 of the Federal Republic of Nigeria (2018) which seeks to promote the development of indigenous capacity and local content in science,engineering and technology.

Read our Alert for details:

Download PwC Tax Alert_CBN Guidelines on Shared Services

Download CBN's GUIDELINES FOR SHARED SERVICES ARRANGEMENT_May 2021

TAT rules on legitimate expectation, and the application of VAT and other taxes on the operations of an airline in Nigeria

Kenya Airways Limited commenced business in Nigeria in 1999. Between 1999 and 2014, the Federal Inland Revenue Service (FIRS) assessed foreign shipping companies and airlines operating in Nigeria to Companies Income Tax (CIT) at the minimum tax rate of 2% on sums received in respect of the carriage of passengers, animals or other goods loaded in Nigeria. This is in line with Section 14(4) of the CIT Act. The Airline remitted its taxes and obtained Tax Clearance Certificates from the FIRS in line with this practice, during this period. 

However, the FIRS issued a Public Notice in 2015, requiring Non- Resident Companies to prepare and submit their tax returns based on their actual profits earned from Nigeria. In the Public Notice, the FIRS stated that where actual profits could not be satisfactorily determined, the FIRS retained the rights to assess such NRCs to tax under the “deemed profits” approach. This approach entails deeming a 20% profit margin, which is then subjected to CIT at 30% (resulting in an effective tax rate of 6% on turnover). This is in line with Section 30 and 14(3) of the CIT Act.

Further to this, the FIRS assessed Kenya Airways to additional CIT, Value Added Tax (VAT) and Withholding Taxes (WHT), including penalties and interest, for the 2009 to 2014 financial years. The company objected to the assessment and approached the Tax Appeal Tribunal (TAT). We have highlighted the key points from the ruling, and included our takeaway in the alert below:

Download PwC Tax Alert- TAT rules on legitimate expectation and the application of VAT and other taxes on the operations of an airline in Nigeria.

FIRS Information Circular on the claim of tax treaty benefits in Nigeria

The Federal Inland Revenue Service (FIRS) has issued an information circular (Circular 2021/05) on the claim of tax treaty benefits in Nigeria. The circular which is dated 3 June 2021, withdraws and replaces the earlier FIRS circular on the same subject issued on 4 December 2019.

 

We present the highlights of the circular below:

Download PwC Tax Alert- FIRS Information Circular on the Claim of Tax Treaty Benefits in Nigeria.

 

FIRS Information Circular on business reorganisation, commencement and cessation rules

The Finance Act 2019, signed into law on 13 January 2020, introduced some changes to the commencement and cessation rules for companies, as well as business reorganisation rules. Subsequently, the Finance Act 2020 was signed into law on 31 December 2020, introducing similar commencement and cessation rules for individuals and unincorporated enterprises.

This includes clarification on the rules for individuals and unincorporated enterprises, as well as other changes in the interpretation of some provisions. We have highlighted these key in the tax alert.

Read our alert below for more details:

Download PwC Tax Alert- FIRS Information Circular on commencement and cessation rules and business reorganisation.