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Nigeria: Excess dividends tax, dividends from post-tax profits

Nigeria: Excess dividends tax, dividends from post-tax

The Tax Appeal Tribunal sitting in Lagos today, 5 July 2019, delivered its judgment in a case concerning whether under the “excess dividends tax” rules, there is an income tax liability for dividends declared and paid out of prior tax profits when the company recorded no profits for the tax year.


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The case is: Actis Africa (Nigeria) Ltd. v. Federal Inland Revenue Service

The case specifically concerned Section 19 of the Companies Income Tax Act and its application to dividends paid from retained earnings. The company recorded no profits for 2014, but declared and paid dividends from its 2013 post-tax profits.

The appellate tribunal held that the “excess dividend tax” is applicable when the dividend paid in a year of assessment exceeds the total profits declared in that year. The tribunal also found that Section 19 only considers the year of assessment when the dividend is paid and the total profits of the company in that year. Therefore, when the dividend paid is more than the total profits in a year, the excess of that dividend over the total profit becomes liable to (subject to) additional income tax.

Read a July 2019 report [PDF 140 KB] prepared by the KPMG member firm in Nigeria

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