FIRS issues Information Circular on the claim of Tax Treaty Benefits in Nigeria

FIRS issues Information Circular on the claim of Tax...

The Federal Inland Revenue Service (FIRS) yesterday, 4 December 2019, issued a public notice informing the public of the issuance of its Information Circular No.: 2019/03 on claim of tax treaty benefits in Nigeria (“the Circular”).

Wole Obayomi

Partner, Tax, Regulatory & People Services

KPMG in Nigeria

FIRS issues Information Circular on the claim of Tax Treaty Benefits in Nigeria

The Circular was issued pursuant to Sections 45 and 46 of the Companies Income Tax Act (CITA), Cap. C21 LFN 2004 (as amended), Sections 38 and 39 of the Personal Income Tax Act (PITA), Cap. P8 LFN 2004 (as amended), Sections 61 and 62 of the Petroleum Profits Tax Act (PPTA), Cap P13 LFN 2004 and Section 41 of the Capital Gains Tax Act (CGTA), Cap C1 LFN 2004.

The Circular is aimed at providing guidance and clarity on the requirements, process of accessing and  computing various tax treaty benefits available to residents and non-residents deriving income from Nigeria and its treaty partners. According to the Circular, Nigeria currently has effective double taxation agreements (DTAs) with fourteen countries.

Below is a summary of the key aspects of the Circular:

1. Eligibility to treaty benefits in Nigeria

The Circular specifies that a taxpayer can only be entitled to benefits under the tax treaty between Nigeria and its treaty partners if the taxpayer is a resident of either Nigeria, the other treaty country or both countries. In addition, the Circular lists the conditions which must be present before the benefits under a treaty can be granted as follows:

  • the taxpayer must be liable to tax in the treaty country of which he is a resident.
  • the income in question is not exempted from tax in Nigeria
  • the tax for which the individual is seeking benefit is covered by the treaty, i.e., income and capital taxes.
  • the benefit is not specifically excluded under the treaty.
  • the benefit is claimed within the time stipulated by the treaty or domestic laws (i.e. not later than 2 years from the year of assessment in which the foreign tax was paid).

Further, a taxpayer who qualifies for treaty benefits may be denied such if it is discovered that its residency in one of the treaty countries was principally for the purpose of accessing treaty benefits.

2. Available treaty benefits

The Circular outlines five reliefs under Nigeria’s DTAs with its treaty partners and provides explanations on what constitutes the benefit under each relief.  

i. Relief from double taxation – tax credit: This is the deduction of foreign tax paid from tax payable in Nigeria by a Nigerian resident in order to eliminate double taxation. The tax rate applied to the foreign income is the lower of Nigerian tax rate or the foreign tax rate, i.e., where the foreign tax rate is higher, the Nigerian tax rate will be applied to the foreign income to ascertain the tax (credit) deductible. However, where the foreign rate is lower, the foreign tax rate will be applied.

ii. Treaty tax rates to foreign airlines or shipping companies: Currently, the DTAs modify the application of Section 14 of CITA to companies operating in the international transport sector in/from a treaty country. The modifications provide two instances for which a company operating in this sector may enjoy the treaty benefits:

  • where there is reciprocity in international traffic between Nigeria and a treaty country of a foreign airline or shipping company. That is, where a Nigerian transport company operates in a treaty country and  foreign transport company from same treaty country also operates in Nigeria, the transport companies will be taxed in their respective countries in a given year of assessment.
  • however, where there is no reciprocity, the tax rate applicable will be as stated in the respective DTA, which is usually between 1% and 1.5%. Only DTAs with United Kingdom, Italy and China are exempted from this rule.

iii. Treaty withholding tax rates for passive income or fees for technical service: The DTAs provide for a lower withholding (WHT) rate to be applied to dividends, interest and royalties paid to a non-resident in a treaty country or paid by a non-resident in a treaty country to a Nigerian resident, provided that such payments are not connected to a permanent establishment of the beneficiary.

However, this lower WHT rate is not applicable to rental income from immovable property, such as land, building, plantation, or royalties from mineral deposits and other natural resources, etc.

iv. Access to Mutual Agreement Procedure (MAP) for dispute resolution:  Where there is a dispute on the interpretation or application of the provisions of a DTA, the taxpayer may resort to MAP to resolve the dispute.

Please click here to access our publication on the FIRS’ MAP Guidelines issued in February 2019.

v. Non-discrimination in tax matters:  By this, it is required that taxpayers in Nigeria or its treaty countries should not be overburdened with more tax requirements than should be fairly expected. Where a taxpayer suffers tax discrimination in this respect, he may apply to his Competent Authority (CA) (or the CA of the treaty partner where the DTA so provides) for redress through the MAP.

3. Procedure for claiming treaty benefits

A taxpayer seeking treaty benefits is required to complete a Certificate of Residence for Nigerian or non-Nigerian residents (as applicable), obtain its tax authority’s endorsement on the certificate before submitting a formal application (together with the endorsed certificate, evidence of foreign tax paid, etc.) to the tax authority of the other country for approval. The forms are available on the FIRS’ website via                                                                                    


The issuance of the Circular on claim of tax treaty benefits is a welcome development as it provides the much-needed clarity on the procedure to access tax reliefs and concessions as provided in the tax laws and under the various DTAs between Nigeria and its treaty partners.

As the FIRS has laid out the procedure for accessing tax treaty benefits in the Circular, the process of claiming the benefits should henceforth be seamless for eligible taxpayers.

Please click here to download a copy of the Information Circular.

For any enquiries on the above, please contact:

Wole Obayomi

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