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Nigeria: Sales in ordinary course of business exempt from withholding tax

Nigeria: Sales in ordinary course of business

The Tax Appeal Tribunal (Lagos Zone) held that sales made by a taxpayer in the ordinary course of its business were exempt from withholding tax.


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The case is: Tetra Pak West Africa Ltd. v. Federal Inland Revenue Service (30 November 2020)


The taxpayer’s principal business activity was the importation and sale of packaging equipment and spare parts to customers in the manufacturing sector.

In July 2016, the taxpayer requested from the tax authority clarification as to whether its principal business—the sale of packaging equipment, spare parts, and materials—qualified as sales in the ordinary course of business and, therefore, were exempt from withholding tax The tax authority responded that these sales were contracts with rights and liabilities that were enforceable by law and, therefore, did not qualify as sales in the ordinary course of business and were subject to withholding tax at a rate of 5%.

The taxpayer sought judicial review by the tribunal which held that the subject sales were made in the ordinary course of business and were exempt from withholding tax.

The tribunal’s decision formulated a set of tests for determining whether a transaction constitutes a sale in the ordinary course of business and, therefore, eligible for an exemption from withholding tax. The tribunal noted that while all contracts and agency arrangements are liable to withholding tax, only sale transactions that are neither normal nor routine with respect to the trade or business of the company would be subject to withholding tax. 

KPMG observation

While the standard set out by the tribunal may not be exhaustive regarding the exemption from withholding tax, the judgment provides a practical basis for a case-by-case evaluation of a company’s sales transactions in relation to its business activity.

Read a January 2021 report [PDF 928 KB] prepared by the KPMG member firm in Nigeria

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