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Nigeria: Companies income tax assessment not allowed on property’s value

Nigeria: Companies income tax assessment not allowed

The Federal High Court sitting in Abuja issued a judgment for the taxpayer in a case concerning the authority of the Federal Inland Revenue Service (FIRS) to assess a company’s liability for Nigeria’s companies income tax based on the value of the company’s properties.


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Nigeria’s companies income tax is payable on the profits of a company “accruing in, derived from, brought into or received in Nigeria” in respect of any trade or business that may have been conducted by the company. Under the tax law, a company must file its tax returns for the year on a self-assessment basis, and report the amounts of profits from all sources. Under the statute, the FIRS is authorized to assess a company on a fair and reasonable percentage of the turnover from its trade or business when the business produces no assessable profits, when the assessable profits are less than might have been expected, or when the true assessable profits cannot be ascertained.

In this case, the FIRS alleged that the taxpayer company did not file its income tax returns for 2015 and thus failed to pay its income tax liability for that year. Accordingly, the FIRS invoked the statutory provisions that allowed it to make an assessment by deeming 20% of the value of a property owned by the company to be the amount of the companies income tax liability and issued an assessment notice for the amount.

The issue before the court was whether the FIRS has the statutory authority to deem the value of the company’s property to be the company’s turnover for the year of assessment (and then to impose income tax on that value).

The court found that the statute only authorizes the FIRS to assess tax on a fair and reasonable percentage of the company’s turnover, and the term “turnover” refers to the aggregate income that a business receives from its normal business activities for a given period (usually from the sale of goods and services). Hence, the value of the company’s property was determined not to be the same as its turnover or income. 

The decision also notes that taxpayers can seek redress in the court in the first instance, without first having to go through the administrative process of objecting to a tax assessment by the FIRS, and appears to invite taxpayers to weigh their options and to consider in which forum to challenge an assessment. 

Read a January 2019 report [PDF 345 KB] prepared by the KPMG member firm in Nigeria

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