The Tax Appeal Tribunal (sitting in Lagos) issued a judgment holding that interest on an additional state tax assessment is to be computed by imposing interest only on the principal amount of the tax liability (not inclusive of any amount of penalty assessed with regard to that principal tax liability).
The case is: Ikeyi & Arifayan v. Lagos State Board of Internal Revenue (16 October 2019)
The Lagos state tax authority issued a demand notice to the taxpayer for outstanding tax liabilities, plus penalty and interest assessments. The taxpayer eventually appealed to the tribunal, and while the case was pending before the tribunal, the parties entered into settlement discussions and agreed on the principal amount of the tax liability. However, the parties could not agree on the related penalty and interest amounts.
The tribunal held that given that the tax laws in Nigeria are silent as to the tax base on which interest is to be computed, interest on additional tax assessments is to be computed only with regard to the principal amount of the tax liability—before a penalty is added to that principal amount of the tax liability.
The tribunal decision resolves an area of uncertainty in Nigerian tax law concerning the process for computing the amount of interest payable on an assessed tax liability.
Read a December 2019 report [PDF 124 KB] prepared by the KPMG member firm in Nigeria
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