The Tax Appeal Tribunal issued a decision affirming that the “excess dividend tax” (imposed under section 19 of the Companies Income Tax Act) applies with regard to dividends paid from tax-exempt incomes (such as income derived from bonds, treasury bills, and other short-term government securities).
The case is: Ecobank Nigeria Ltd. v. Federal Inland Revenue Service
The taxpayer (bank) invested in Nigerian federal government’s bonds, treasury bills, and other short-term securities in addition to its core banking services. The taxpayer reported a tax loss in 2015 financial year after excluding its tax-exempt income from its companies income tax computations. However, the taxpayer paid dividends, in part, from income earned from the tax-exempt income derived from its investment in government securities, treasury bills, and bonds.
The tax authority in 2016 conducted a tax audit and assessed the excess dividend tax on the entire dividend amounts. The taxpayer countered that the portion of its dividend that was sourced from tax-exempt income was not subject to the excess dividend tax.
The appellate tribunal held that the excess dividend tax applied to the dividend amounts derived from the investments in government securities, treasury bills, and bonds.
Read a March 2020 report [PDF 1.9 MB] prepared by the KPMG member firm in Nigeria
The KPMG logo and name are trademarks of KPMG International. KPMG International is a Swiss cooperative that serves as a coordinating entity for a network of independent member firms. KPMG International provides no audit or other client services. Such services are provided solely by member firms in their respective geographic areas. KPMG International and its member firms are legally distinct and separate entities. They are not and nothing contained herein shall be construed to place these entities in the relationship of parents, subsidiaries, agents, partners, or joint venturers. No member firm has any authority (actual, apparent, implied or otherwise) to obligate or bind KPMG International or any member firm in any manner whatsoever. The information contained in herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's Federal Tax Legislative and Regulatory Services Group at: + 1 202 533 4366, 1801 K Street NW, Washington, DC 20006.