The NPTF Act establishes the Nigeria Police Trust Fund (“the Trust Fund”) to receive funds from various sources, which will be utilized to:

• meet the training and re-training needs of the personnel of the Nigeria Police Force (NPF) and its auxiliary staff within and outside Nigeria;
• enhance the skills of the personnel of the NPF and its auxiliary staff for improved proficiency in the  use of  operational equipment and  machineries;
• improve on an overall basis, the performance and efficiency of the NPF personnel in the discharge of their duties and responsibilities;
• purchase equipment, machineries, including operational vehicles for the NPF;
• construct police stations, provide living facilities, such as quarters or barracks for the NPF;
• finance the procurement of books, instructional materials, training equipment for use at Police Colleges and such other similar training institutions;
• meet the cost of participation by the personnel of the NPF at seminars and conferences relevant to or connected with policing or intelligence gathering; and
• for such other purposes incidental to or connected with the attainment of objective of this Act.

Section 3 of the NPTF Act establishes the Trust Fund as a body corporate with perpetual succession and a common seal, which may sue and be sued in its corporate name. However, Section 2 of the Act provides for a 6-year tenure for the Trust Fund, effective from the date of commencement of the Act, after which the Trust Fund shall cease to exist, unless it is extended for any period by an Act of the National Assembly.

Section 4(1)(b) of the Act provides for various sources of funding for the Trust Fund, including:

• 0.5% of the total revenue accruing to the Federation Account
• a levy of 0.005% of the net profit of companies operating in Nigeria
• take-off grants and special intervention funds as may be provided by the Federal, State and Local Governments of the Federation
• aids, grants and assistance from international bilateral and multilateral agencies, non-governmental organizations and the private sector
• money derived from investment made by the Trust Fund

The NPTF Act also establishes the NPTF Board of Trustees, which will be responsible for investing money accruing to the Trust Fund, setting policies for training and retraining of personnel of the NPF, and so on.  The Act exempts the Trust Fund from the payment of income tax on any income accruing from investments made by the Trust Fund.

Matters Arising

The Federal Government’s decision to establish the NPTF to strengthen the NPF is a welcome development. If properly administered, it can greatly improve the working and living conditions of the NPF personnel and equip them for effective performance of their statutory responsibilities. However, it is another instrument of multiple taxation of Nigerian businesses which, in addition to their regular 30% corporate income tax, are currently saddled with payment of 2% of their assessable profits as tertiary education tax and, depending on their industry, 1% of their profit before tax as National Information Technology Development Agency (NITDA) levy (payable by companies in the financial and information and communications technology industries), and 1% of their contract value as Nigerian Content Development Fund levy (payable by companies operating in the oil and gas industry), etc.

In addition, we have highlighted below the potential practical challenges associated with the  implementation of the Act, which require urgent attention:

1. There is no provision for the tax-deductibility of the mandatory levy payable under the NPTF Act by companies operating in Nigeria. This is a departure from the arrangement under similar legislation, namely, the NITDA Act and the Nigerian Content Development Act, where the mandatory contributions are tax-deductible.
2. There is no provision in the NPTF Act for the body that will be responsible for collecting the levy, the due date of remittance of the levy, and whether the levy would be payable on demand or by self-assessment, and penalty for failure to remit it.
3. “Net profit”, as the basis on which the contribution is to be made, is not defined in the NPTF Act, which could give rise to diverse interpretations.  For instance, net profit could be computed using a company’s profit before interest, taxes, depreciation and amortization, profit before tax, or profit after tax.
4. There is also no provision for dispute resolution in the event that a company disagrees with the amount of levy imposed on it.
5. It is unclear whether reference in the NPTF Act to “companies operating in Nigeria” would include non-resident companies carrying on business in Nigeria, especially in the oil and gas industry. Where this is intended to be the case, the criteria for determining whether a company is “operating in Nigeria” are not defined in the Act as in the Companies Income Tax Act with respect to permanent establishment.

In the final analysis, contributors to the Trust Fund and the entire nation would be interested in the judicious use of the funds, the resulting impact on the strengthening of the capacity of the NPF evident in the improvement of the security situation in the country, and full accountability by those charged with oversight of the funds.  

For any enquiries on the above, please contact:

Wole Obayomi

ng-fmtaxenquiries@ng.kpmg.com