Individual - Significant developments

Last reviewed - 09 February 2024

Tax Appeal Tribunal (TAT) rules that an employer who defaults in its agency role to the government is liable to penalty and interest

In 2017, the Lagos State Internal Revenue Service (LIRS) audited a Nigerian company (NigCo) for the 2011 - 2016 Years of Assessment. The LIRS assessed the company to outstanding pay-as-you-earn (PAYE), withholding tax (WHT), development levy, and business premises levy liabilities plus penalty and interest. NigCo objected to the assessment, and the matter was eventually taken to the TAT.

The TAT ruled that NigCo did not comply with the relevant provisions of the Personal Income Tax Act (PITA) and the Regulations in delivering its agency responsibilities; consequently, NigCo is liable to the tax liability (including penalty and interest) assessed by the LIRS.

This judgement re-emphasises the agency role of employers and the consequences of non-compliance with tax laws, which could be business disruptions and liabilities as high as the unpaid tax plus 31%.

State tax authorities impose fines of 5 million Nigerian naira (NGN) per month for failure to verify Tax Clearance Certificates (TCCs)

Section 85(2) of PITA requires ministries, agencies, and banks to verify the TCC of individuals on specific transactions. These transactions include application for foreign exchange, government loans, and election into public office, amongst others, as specified in the Act. PITA imposes a non-compliance fine of NGN 5 million or imprisonment for three years or both, upon conviction.

Further to this requirement, several state tax authorities have started demanding certain taxpayers (especially banks) to pay the non-compliance fine of NGN 5 million from 2005 and within seven days of receipt of the assessment. Also, the tax authorities take the view that the NGN 5 million fine is on a monthly basis.

The LIRS issues Public Notices on capital gains tax (CGT) and personal income tax (PIT) on the sale of securities

The 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:

  • The Capital Gains Tax 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.
  • 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 ten years (i.e. until 1 January 2022), except for Federal Government bonds, which will continue to be exempt. The ten-year period has now lapsed, and the LIRS communicated that the exemptions have expired.

The LIRS launches Service Charter

On 28 July 2021, the LIRS released a Service Charter highlighting the LIRS’s 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.

Expatriates to obtain Nigeria’s National Identity Number (NIN)

Section 16 of the NIMC Act defines registrable persons to include Nigerian citizens, permanent residents, and foreigners who are legally resident in the country for a period of two years or more. Below are the list of requirements for expatriates to obtain a NIN:

  • International passport.
  • Residence permit (CERPAC form/card).
  • Bank Verification Number (BVN).