19 Jan



106 Sections, 14 parts and 6 schedules. Section 1-8 has been removed so we shall start our sectional discussion from:

Section 9: is the charging provision. It provides the basis of liability. On the profits of any company accruing in, brought into or received in Nigeria in respect of:

  1. Any trade or business for whatever period of time: “trade/business” was not defined in the act. What amounts to trade or business is a matter of fact based on the circumstances of each case. The 1955 Royal Commission of UK submitted certain badges of trade. Trade has an expanded meaning while business has a wider meaning. In construing such, we look at:
  • The subject matter of the transaction.
  • Length of the period of ownership.
  • Frequency of transaction: where frequent, it may amount to trade. However, in Arbico V FBIR, the court noted that the disposition of the landed property to the government by the plaintiff were taxable notwithstanding that it was a one-time thing or that the company was not in the business of buying and selling. Holding that one transaction could amount to trade or business. As Section 9(1a) states ‘for whatever period of time’
  • Adaptation: in Cape Brandy Syndicate V IRC: three taxpayers amalgamated and mixed three types of drinks and encased it in different bottles under a new name. They disagreed that they were involved in trade. This argument was rejected and the court held in favour of the authorities… i.e. that they were involved in trade.
  • The motive: in Religious Tract and Books Society case, the object of the society was distributing tracts. It then set up a book store. Court held that the society was engaged in trade.

Worthy of note is Section 9(1d) which paints a wide base… “any other income”. Thus, even if the transaction does not fall under what was listed in sub a(trade), b(rent)  and C(investment income), it may still be taxed under Section 9(1d)

From the foregoing, it is apparent that the CITA seeks to tax companies on their profits which have a connection with Nigeria notwithstanding that they are not incorporated or resident in Nigeria.

Section 11 exempts interest on loans to agricultural and like manufacturing businesses… foreign loans.

Section 13 though labelled “Nigerian companies” provides a basis of liability for both Nigerian and foreign companies Section 13(1) provides that the profits of a Nigerian company shall be deemed to have accrued in Nigeria notwithstanding that they have not been brought into or received in Nigeria. This is an anti-avoidance provision which seeks to ensure that Nigerian companies must pay tax whether the income was internally generated or of foreign origin.

Consequently, if a Nigerian company has branches all over the world, it should pay tax on the income of its branches in other parts of the world. This situation can be avoided if each branch is registered as a separate entity in the respective countries. E.g. Unilever Nigeria, Unilever Ghana.

In respect of other companies, Section 13(2) provides profit/income shall be deemed to be derived from Nigeria where:

  • The profit is attributable to a foreign company’s fixed base in Nigeria.
  • If it operates a trade in Nigeria through an authorized person.



Quite eccentric really

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