Corporate Tax 2010 - BMR Advisors

Chapter 35
Nigeria
Oyetola Oshobi
Babalakin & Co.
Kehinde Daodu
1 General: Treaties
1.1 How many income tax treaties are currently in force in
Nigeria
Nigeria currently has income treaties with several countries
including Belgium, Canada, the Czech Republic, France,
Netherlands, Romania, Pakistan, United Kingdom and Italy.
1.2 Do they generally follow the OECD or another model
The model used by Nigeria is a hybrid of the OECD Model and the
UN Model but leans more in favour of the UN model.
1.3 Do treaties have to be incorporated into domestic law
before they take effect
Yes, by virtue of Section 12(1) of the 1999 Constitution of the
Federal Republic of Nigeria, a treaty does not have the force of law
in Nigeria until it is domesticated. The domestication of the treaty
entails its passage into law by both Houses of the Federal
Legislature and receiving the Presidential assent.
1.4 Do they generally incorporate anti-treaty shopping rules (or
“limitation of benefits” articles)
No, anti-treaty shopping rules are not generally incorporated.
1.5 Are treaties overridden by any rules of domestic law
(whether existing when the treaty takes effect or
introduced subsequently)
section is, however, not clear in view of the aforementioned
constitutional requirements, as it has not been subjected to judicial
interpretation. In practice, the Federal Inland Revenue Service
always honours treaty obligations in the assessment of tax liability.
2 Transaction Taxes
2.1 Are there any documentary taxes in Nigeria
Yes, stamp duties are payable on instruments listed in the Schedule
to the Stamp Duties Act.
2.2 Do you have Value Added Tax (or a similar tax) If so, at
what rate or rates
Yes, we have Value Added Tax (VAT) in Nigeria. VAT was
introduced into the country by the VAT Act No 2 of 1993, to replace
the old sales tax. The Act requires every taxable person upon
registration with the Federal Inland Revenue Service (FIRS), to
charge and collect VAT at a flat rate of 5% (five percent) of all
invoiced amounts of taxable goods and services. All businesses
(old and new) are required to be registered with VAT office as VAT
collection agents. There is also a Sales Tax in Lagos State, which
is currently at the rate of 5% (five percent). This tax is, however,
being challenged by the Manufacturers Association of Nigeria. In
addition, Lagos State is at the moment challenging the competence
of the National Assembly of Nigeria to legislate on VAT and the
right of the Federal Government to collect VAT.
2.3 Is VAT (or any similar tax) charged on all transactions or
are there any relevant exclusions
As stated in question 1.3 above, treaties do not have a force of law
until ratified by the Houses of the Federal Legislature. Once
ratified, they become part of the domestic laws albeit with
international flavour. In the event of conflict between a ratified
treaty and any rule of domestic law, the treaty will take precedence.
This is the decision of the Supreme Court of Nigeria in Abacha v
Fawehinmi (2000) 6 NWLR (Pt 660) 228 at 289 paras D-E.
However, the provisions of the Constitution of the Federal Republic
of Nigeria, 1999 overrides any other laws in Nigeria including
domesticated treaties and where there is a conflict between a treaty
and the Constitution, the provision of the Constitution will prevail.
It should be noted that Section 45(1) of the Company Income Tax
Act 1961 (CITA) provides that treaties shall have effect
notwithstanding anything to the contrary in CITA. The effect of this
ICLG TO: CORPORATE TAX 2010
© Published and reproduced with kind permission by Global Legal Group Ltd, London
VAT in Nigeria is charged and payable on the supply of taxable
goods and services. The VAT Act lists in its first schedule those
services that are exempt from VAT. Some of these include: all
medical and pharmaceutical products; baby products; plants and
machinery imported in the Export Processing Zone and Free Trade
Zone; medical services; plays and performances conducted by
educational institutions as part of learning; all export services; nonoil
exports; and goods and services purchased by diplomats etc.
This is, however, not an exhaustive list. Please see the VAT
(Amendment) Act 2007 for a comprehensive list.
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