Tax & Business Matters - Nigeria

FHC rules that Finance Act amendments should not apply to income earned prior to enactment

The Finance Act 2019 (“FA 19”) was signed into law on 13 January 2020. One of the FA 19 amendments was the removal of the Minimum Tax exemption previously granted in the Companies Income Tax Act (“CITA”), to companies with at least 25% foreign ownership. The question that then arose was how to determine the accounting period covered by FA 19.

Accugas Limited (“Accugas”), a company with at least 25% foreign ownership and with a January to December financial year (FY), filed its 2019 FY returns in June 2020. On this basis, Accugas wrote to the Federal Inland Revenue Service (“FIRS”) to confirm that the minimum tax exemption still applied to its 2019 FY returns, since the amendments became effective in January 2020. The FIRS refused the request, stating that the law change affects returns due after the effective date, notwithstanding that the FY was before the amendment. To avoid interest and penalty, Accugas filed its tax return and paid the minimum tax. Accugas thereafter filed an appeal at the Federal High Court (“FHC”).

The FHC ruled that FA 19 did not apply to income earned before its enactment, and that as the intention of the legislature was not to make FA 19 apply retroactively, FA 19 could not be given retroactive effect. Therefore, Accugas could still enjoy the pre-FA 19 minimum tax exemption, to its 2019 FY returns filed in 2020.

The judgement raises interesting questions with respect to the application of FA changes, especially with respect to CIT. Companies are encouraged to review how the judgement could impact their historic tax returns and what their approach should be if the FIRS appeals the judgement.

Please see our Tax Alert on this, and the FHC judgement below:

Download PwC Tax ALert - FHC rules that Finance Act Amendments should not apply to income earned prior to its enactment

Download Judgment - Accugas v FIRS & 1Or

Court of Appeal upholds the FIRS’ powers to collect VAT on goods and services consumed in hotels, restaurants and event centres

On Friday, 1 July 2022, the Court of Appeal (CoA) affirmed the authority of the FIRS to collect VAT from all taxpayers including for goods and services consumed in hotels, restaurants and event centres. In doing this, the CoA set aside the Federal High Court (FHC) judgment of 2019, where the FHC had issued a converse judgement.

The CoA judgment aligns with the reasoning of the Supreme Court in Attorney General of Lagos State v. Eko Hotels Limited & Federal Board of Inland Revenue in 2017, where the Supreme Court held that VAT Act had covered the field of consumption tax, and so any similar tax would be invalid and result in double taxation. 

The continued legal tussle over consumption tax vis-a-vis VAT is not good for business, as it creates uncertainty and adversely impacts the ease doing business in Nigeria. Unfortunately, the decision of the CoA may not be the end of the disputes.

Please see our Tax Alert on this below:

Download PwC Tax Alert - CoA upholds the FIRS' powers to collect VAT on goods and services consumed in hotels restaurants and event centres

 

LIRS issues Public Notices on Capital Gains Tax and Personal Income Tax on the sale of securities

The Lagos State Internal Revenue Service (LIRS) has issued Public Notices pursuant to recent tax law changes, highlighting compliance requirements from taxpayers and other relevant parties resident in the state.

The relevant tax law changes include:

1. The Capital Gains Tax (CGT) Act historically exempted gains on the disposal of Nigerian government securities, stocks and shares from CGT. The Finance Act 2021 has amended the CGT Act to introduce CGT on the disposal of shares, subject to certain conditions.
2. The Minister of Finance (MoF) issued a Notice effective from 2 January 2012, exempting interest and other income earned from government, corporate and supranational bonds from PIT. The MoF Notice highlighted that the exemption was for a period of 10 years (i.e until 1 January 2022), except for FG bonds which will continue to be exempt. The 10-year period has now lapsed, and the LIRS communicated that the exemptions have expired.

We have analysed the LIRS Public Notices, including the recently introduced compliance requirements and the technical merits of the LIRS' position, in our Tax Alert below: 

Download PwC Tax Alert - LIRS issues Public Notices on Capital Gains Tax and Personal Income Tax on the sale of securities

Highlights of Nigeria’s 2022 Fiscal Policy Measures

The federal government of Nigeria has approved the implementation of the 2022 Fiscal Policy Measures and Tariffs Amendments (FPM 2022), with an effective date of 1 April 2022.

The FPM 2022 replaces the FPM 2021, and among other changes:

• Introduces Import Adjusted Tax (IAT) on 172 tariff lines, and prohibits certain goods originating from non ECOWAS member states.
• Sets out excise duty rates on non alcoholic beverages and telecommunication services following the recent tax law amendments, and updated excise duties on alcoholic beverages, cigarettes and tobacco products. A grace period till 1 June 2022 was given for the implementation of the new excise duty rates.

Please see a copy of FPM 2022 and our Tax Alert below for more details. 

Download PwC Tax Alert - Highlights of Nigeria’s 2022 Fiscal Policy Measures

Download 2022 Fiscal Policy Measures

PwC's Tax Academy - Tax and Environmental, Social, and Corporate Governance (ESG)

PwC's Tax Academy will be hosting a session titled "Tax, Regulatory Governance and Sustainability: Key Considerations for Corporate Transactions and ESG” scheduled to hold on Tuesday, 19 July 2022.

ESG is taking the centre-stage in the world of business, with investors paying more attention to the wider social and ethical impact of their investments, apart from profit considerations. Similarly, stakeholders are becoming increasingly focused on tax transparency and disclosures to evaluate the contribution of business to the society.

In this session, we will discuss the need to align overall corporate goals with ESG objectives, and designing sustainable tax strategies that cater to the needs of investors and a wider stakeholders.

The training fee is NGN 90,000 exclusive of VAT (currently at 7.5%). You can click here to register for this and/or other sessions online.

FIRS extends deadline for filing 2022 income tax returns

The Federal Inland Revenue Service (FIRS) has extended the deadline for the filing of corporate income tax returns which are due to be filed between 30 June and 31 August 2022. These returns are now to be filed not later than 31 August 2022.

 

Also, the time required for tax payment has also been extended accordingly. Therefore, there will be no penalty for late returns and payment for 2022 in respect of the relevant tax returns that are filed by 31 August 2022. The extension only applies to CIT returns, other taxes such as VAT and withholding taxes are not covered.