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Nigeria: Excess dividend tax applies to income exempt from tax (appellate tribunal decision)

Nigeria: Excess dividend tax

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).


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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

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