1. General Nature of Law of Taxation
  • Distribution between revenue law and tax law
  • Tripal of taxation- law, policy and Administration
  • Taxation as a multi-disciplinary subject
  • Scope of law of taxation
  • Taxation as an emerging discipline in Nigeria
  • Sources of Law of Taxation in Nigeria
  1. Definition of tax and taxation, nature of tax, distinction between tax and user charges and related terms, classification of taxes, importance and functions of taxation, historical development of taxation, tax principles, concepts and rules, historical development of taxation in Nigeria, General outline and features of the Nigerian Tax system, constitutional and statutory  framework  of taxation in Nigeria.
  2. Fundamentals of public finance and fundamentals of Tax Accounting
  3. Division of taxing powers and issue of fiscal federalism and resources control
  4. Evasion and Avoidance
  5. Interpretation of tax statutes
  6. Personal income Taxation-law and practice of Direct Assessment-Principles and Rules
  7. Personal income Taxation- Law and Practice of Pay As-You-Earn (PAYE) Principles and Rules
  8. Personal income Taxation and Withholding taxt-tax and t-tax enforcement-matters arsing
  9. Property Taxation
  • Definition of property
  • Forms of property taxation
  • Property taxation in Nigeria
  • Legal framework for taxation of tenement
  • Legal framework for land use charges
  • Matters Arising
  • Developments in Property Taxation in other states
  • Federal Capital Territory
  • Cross Rivers, Rivers


  1. Companies Income Tax
  2. Real Entity Theory/ Natural Theory
  3. Tax Exemptions
  4. Profits Exempted from Tax
  5. Ascertainment of Profits
  6. Stamp Duties
  7. Administration of Stamp Duties
  8. Penalty for Non-Compliance
  9. Value Added Tax
  • Rates
  • Registrable
  • Credit method
  • Tax Returns


Understanding the concept of tax, we need to first of all have a full grasp of the concept thus a definition.

Tax was plainly defined in the Oxford Advanced Learners Dictionary (1973) as a compulsory contribution that is to the support of the government levied on a person’s income, property etc. at a fixed rate proportionate to the amount that was levied.

However, the Oxford Advancement Learners Dictionary (2006) simplified it to mean money paid by the people so that government can pay for public services.

Judicially it was defined in the landmark case of Matthews v. Chicory Marketing Board (1983) 60 CLR as a compulsory Marketing Board money by a public authority for a public purpose.

Unfortunately, there will be no legislative authority which spells out what tax is, however to have legality, there are certain requirements the money collected must meet.

  • It must be backed by the legislature
  • It must be remitted to the country’s treasury
  • The tax must also be compulsory in nature
  • Not for a direct benefit



There are various importance of taxation to the economy of a country. These include;

  • Revenue generation
  • Instrument of determent of particular harmful or wrong activities
  • It generally reduces investment in the provision of basic amenities for private business which government have finally provided for
  • Improves standard of living of the populace
  • Aids redistribution of wealth in the society
  • Control immigration and population

Factors distinguishing a tax from a levy

  • A tax must be compulsory
  • It must be imposed by a government or authority
  • To be used for a public purpose
  • The most relevant case is Matthews v. Chicory Marketing Board.




  1. Constitution

It is that the primary source of law in Nigeria is the Nigerian constitution

S.4 (a) of the 1999 Constitution provides that all matters relating to the Exclusive legislative list can only be legislated upon by the Federal Government.

S.4 (9) (b) of the 1999 Constitution provides that matters under the concurrent list belong to both the state and Federal Government.

  1. Statutes

Another major source of tax law are the statutes. There are authoritative statutes such as Personal Income Tax Act (PITA), Capital Gains Tax Act.

Saipen v. FIRS; Global Drilling v. FIRS

  1. Administrative Materials

Another major source of tax law is the administrative materials. See the case of Global Int’L Drilling Company v. FIRS (The court held the FIRS is not bound by its own opinions and circulars) FIRS sends out circulars in forming the tax payer of the ways to abide by the provisions of the law.

However, where such circulars contravene the law, then the law will supersede. This was the issue in the case of Saipen V. FIRS where the court of held that it doesn’t matter what the FIRS opinion is, what the statute says is what the law is. The court says “it is merely an explanatory, note and it doesn’t supersede the statute”

  1. Case Law/Judicial Material

Shell v. Federal Board of Inland Revenue

Another course of tax law are case law and judicial material which includes tax journal.

In this case, the court held that although it is not expressly provided in the statute, expenses which aid the furthering of the business is not taxable

  1. Treatises: This included books, journals, articles Vodacom v. FIRS
  2. Hansard: This is the record taken of the debate which takes place in the legislative in the process of passing a law.

Agip v. FIRS- The court used the dictum of Justice Tobi in the case of Onogonuwa v The state.





The tax system was not a novel concept to Nigeria, as in the various ethnic regions they had adapted and operated an indigenous tax system. It could then be properly identified that the tax system in Nigeria could be classified into

  • Pre-colonial
  • Colonial
  • Post-colonial

Pre-Colonial Taxation System

Rightly identified was the fact that the pre-colonial tax system was different indigenous system of taxation as there were different regions in what is now Nigeria. Thus, there were majorly the Northern and Northern region. Then we had several kingdoms including Oyo, Benin, Kamim, Lagos and Sokoto caliphate. This brought an integral aspect of our society, however different as with every kingdom.

Thus, in the northern region, they applied the Islamic system of taxation where the emir developed the tax system such as

  • Payment of Zakkat
  • Jizyah
  • Shukka-Shukka
  • Jangah
  • Kardin Kasa

In Southern Nigeria, they had a formalized central system and thus administration of tax was also centralized.

In other communities who didn’t have any form of organized system, the tax system was hardly organized. However, peculiar to the traditional tax system was that it was not pecuniary (money), they could pay by service/exchange such as Ishakole.


The organized tax system in the Sokoto enabled the British to introduce indirect rule. Furthermore, under Lord Lugard the first income tax law which set to consolidate all the traditional tax laws was introduced with Land Revenue Proclamation of 1904. In 1917, after the 1914 amalgamation the tax law was introduced to Southern Nigeria by waking changes to the Land Revenue Proclamation of 1904 which was now made Native Revenue Ordinance of 1917 which became operative in 1988 in the south and 1928 at the east.

The  Native Ordinance appear discriminating and it appeared to be applicable only in other parts apart from Lagos. In 1937, Native Direct Taxation colony) Ordinance No 41 of 1937 was passed to govern taxes within Lagos.

Later, Non-native (protectorate) ordinance of 1939 was created for non-native taxation. The ordinance of 1917, 1918 and 1928 was consolidated to create the Direct Tax Ordinance No 4 of 1940. This was the pioneer tax legislature in Nigerian where tax was levied on the community.

The community was interpreted in Sec 2(1) of the 1940 Ordinance as comprising any town, village or any locality. Sec 4 of the 1940 Ordinance identified how tax was derived. This was considered the first tax law.


The failure of the Direct Taxation Ordinance was a lack of uniformity in the administration of tax in Nigeria. The tax officers only levied tax on Africans throughout the country and Europeans that lived in FCT & Lagos. Thus, not on Europeans in the former regions.

It applied to both persons and companies. The 1940 Ordinance had a narrow tax base and limited tax instruments, locking revenue elasticity.

These identified problems resulted in the Raisman Fiscal Commission of 1958. The Raisman Commission Recommendation was the basis of Income Tax Management Act of 1961. This went through periodic reviews which resulted in the Personal Income Tax Act.


Tax is generally a major source of revenue. There are however, various levies and charges which have  a semblance of tax but are not taxes. The aim is to understand the distinguishing features of tax.

Significant to note, that there is no definition of tax however a description of where they believe tax to be from (Case Law, Journal or Articles).

Tax is a compulsory contribution backed by law. There is no direct benefit for tax paid. A statutory collection which is not directed to a specific benefit.

Matthews v. Chicory Marketing Boara (1935) 60CLK @ 263 Compulsory extraction of many under the law for public purpose by public authority.

United S. v Butter 2229 US 1 (1935) an extraction for the support of the government.

Michigan Employment Sec. Com. v. Platt- this is a non-voluntary contribution enforced compulsory by a legislative authority.

Tax is a burden laid upon individual or property in support of the government.

National Tax Policy is a monetary charge on a person or entity’s income, property collected by a defined authority at federal or state level.



  1. Direct Tax: Here the demand of the tax which falls heavily on the tax payer e.g., Company Tax, Capital Gains Tax, here the burden falls directly on the tax payer. It is commenced by an assessment notice.
  2. Indirect Tax: This is a type of tax that’s not collected from the ultimate payer directly but through a means or an agent. e.g VAT (Value Added Tax), PAYE (Pay as You Earn).
  3. Progressive Tax: Here the tax base increases as the income increase. Schedule 6 of personal Income Tax Act which relates to PAYE system. This encourage is vertical equity.
  4. Regressive Tax: Where the tax base increase as the income reduces and vice versa and vice versa for the high-income earners e.g. Sin Tax, Tax holiday System, Pioneer Status.
  5. Proportional Tax: Here the proportion of the tax base remains as the tax base increase or decreases proportionally. There is equality simplicity Sec 69 (1 &2) PITA, Sec 40 of the CITA and Sec 4 of VAT

Generally, in categorizing tax, you can either use income theory or incidence theory. Under income theory, we have proportional, progressive and regressive. Incidence theory is taxing on where the transaction holds.



S.69-72 OF PITA

Withholding Tax


S.40 of CITA

S.4 of VAT

S.2 of CGTA

S.69 (1) Deduction of tax on rent

Whenever there is a rent paid, tax is paid to the relevant tax authority – S.69(2) provides  the tax rate as 10%.

S.70 – Deduction of tax on interest

(1) Interest/Royalty

(2) – 10% of gross interest, 5% of gross royalty

S.71 – Deduction of tax on dividend

(2) – 10%

S.5 of CITA – Rates of tax

S 40(1) – 30 Kobo for every naira 30%

S.4 of VAT – 5% VAT on every taxable goods

S.2 of CGTA-10%

Advantages of proportional Tax System

  1. Equality
  2. Simplicity- The calculation is easy for everyone to do
  3. It does not affect income distribution
  4. Neutralizing effect
  5. Non-distribution

Disadvantages of Proportional Tax System

  1. Inequitable
  2. Less productive
  3. It is against taxable capacity


Progressive Tax System

An increasing proportion as income increases e.g., PAYE, Vertical equity, Income redistribution

First 300,000 at 7%

Next 300,000 at 11%

Tax per year


Next 5,00,000 at 15%

Next 500,000 at 19%

Next 1,600,000 at 21%

Above 3,200,000 at  24% 6th schedule to the PITA


Advantage of Progressive Tax System

  1. If ensures increase in payment of tax
  2. Equitable equality
  3. Encourages better use of resources & economic stability

Disadvantage of Progressive Tax System

  1. It encourages tax offences like tax evasion
  2. Discourages capital formation e.g investment as it discourages savings
  3. It is arbitrary: There is reason for the yardstick
  4. It is family

Regressive Tax System

Examples are

  1. Tax holiday/tax incentives, pioneer status
  2. Sin taxes e.g., Alcohol-soda, Cigarettes, Gambling


The less the income, the more the tax

This encourages rich investors to come into a community. More income less tax



Fails to take care of the economic needs of the masses.

Incidence of tax

Direct tax system

This demanded from the person who is to pay it. Company tax, capital gains tax, PAYE

Indirect Tax System

VAT, Stamp duties, Excise & Custom Duties


It is easier.

Functions of a good tax system

  1. Income Generation
  2. Income Redistribution
  3. Influence on consumption patterns
  4. Checking accommodation of personal wealth


Essential characteristics of Tax

  1. Equity
  2. Certainty
  3. Comment
  4. Administrative efficiency


The Nigerian Tax System is statutory as seen in section 4 and 59 of the constitution of 1999. All levels of government that is, Federal, state and local government collect taxes

S.4 (2) Item D9 in Part 2 of 2nd Scheduled Tax Levies Act & (Approved List for Collection Act).

Personal Income Tax Act

S.2 of the Personal Income Tax Act (PITA) provides for states to collect taxes.

S.3 provides for the type of income like every international tax practice system, the Nigerian tax system is statutory, not common law based. This enhances certainty. It is a combination of statutes that enable all tiers of government to collect taxes. Local government can collect taxes by virtue of the constitution and an enabling law of the state House of Assembly.

This is the first system of tax (Section 1 of PITA) levies on individuals, communities, estates, family, trusts.

S.2 of PITA – A state where a person is residing that will collect tax. Companies pay tax under CITA companies are artificial persons while humans are Natural persons.

PITA, 1993 contained in Cap P8 2004

PITA (Amendment) Act 2011

S.3 of PITA – Any type of gain and profit from profession, trade, vocation, business.

S.10 PITA- Under Nigeria P.I.T law, the underlying basis for paying P.I.T is RESIDENCY. If you are resident in Nigeria, you will pay tax on income from.

Schedule 6 lists the rate for PIT

Companies income Tax Act (CITA)

CITA Cap (2) (AMA, S.37, Cap C20

As from the date of registration of a company, the company can act as a natural person. FG collects CIT S.9 of CITA imposes company income tax on all companies in Nigeria. S.40 of CITA states the rate of the tax is 30%

S.13(2) & S.30(1) (b) – Attribution Principle

If income is derived from Nigeria, no matter where the company is, it must pay tax in Nigeria.

  1. 30(1) (b) – This is where the company is not a Nigeria company if it has a fixed base in Nigeria that is, structure built in their name that they can come to. If it has an agent in Nigeria, executes a single contract and the contract is not at arm’s length.

Double Taxation

This is a problem for foreign company taxing income in two countries.

Countries can enter into a double taxation treaty as to what income each country will be tax S.44 & 45 OF CITA, S. 38 & 39 of PITA

Tax Reliefs

  • Pioneer companies & status

IDITRA (Industrial Development (Income Tax Relief) Act) – IDITRA Cap 17

If a company is a pioneer, the first to do a particular job in Nigeria, it grants the first three years free of tax and can file for renewal of one year twice. This is a total of 5 years. For companies just starting out, it does not pay tax in its first year.

  • Qualifying Capital Expenditure Relief

If a company is trading in the EEZ (Export Trade Zone), he can get 100% free of all capital expenditure e.g purchase of machinery.


  • Minerals & Miming Act

Minerals & Miming Act No 7 of 2007

S.20 provides for incentives for miming  companies

  • Solid Minerals Relief

For companies involved in solid mineral e.g., quarrying.

Development Levy

This is paid to the state by resident of each state. In Lagos, the flat rate is N100 per every adult.

Tertiary Education Trust Fund Act No. 11 of 2001 2% is imposed on the profit of all corporations in Nigeria.

Thus, all companies pay 20% tax. This is for post-secondary school education. This is paid to FG.

Petroleum Profit Tax System

  1. 44 (3) of the 1999 CFRN – All minerals are vested in FG

Thus, FG owns all the minerals in the country.

PPTA Cap P13 LFN 2004 – The rate is 85% imposed on profit of companies engaged in petroleum in Nigeria. There is oil exploration and ordinary sale.

Ordinary sellers are companies and are governed by CITA. Oil explorers pay PPT.

Capital Gains Tax System

Prior to 1967, there was no capital gains tax.

CGTA CAP C1 LFN 2004 – S.2 of CGTA governs a 10% tax on any transfer of a capital asset.

If you have a property abroad and it is sold abroad and the Federal Government collect Capital Gains Tax. FG collect CGT from companies and SG from individuals.

Sales Tax System

Value Added Tax Act Cap V1 Amended in 2007. It abolished all old sales law. FG administers Sales Tax System- V.A.T on behalf of the Sales and Federal Government. 15% to Federal Government, 50% to state Government, 35% to Local Government.

Excise & Custom Duties

Custom Duties are imposed on imported goods and Excise Duties on locally produced goods. FG collects Custom Duties & Excise Duties as they are international & interstate transaction.

Stamp Duties

Governed by Stamp Duties Act

Stamped documents are advisable in courts. Federal document, company document stamp duties are paid to FG

Tenement Rate

State makes law and the rates are collected by local government.

Tripod of Taxation

  • Law
  • Administration
  • Policy

Law must align with business and economic policies made by the executive and administration is to make sure the law and policies are followed.

All three must work together to ensure proper and efficient taxation system.


Tax is statutory. Interpretation of tax statutes is very important. Why? Woods can be ambiguous. In Nigeria, interpretation of tax statute is strict. For tax liability to arise, there must be a clear link between the charging statute and the intended tax payer.

The link must be direct and not inferential. Authority v. Regional Tax Board

Tenement v. Smith

Rules of Interpretation

Literal Rule: This is the most preferred rule. Judges should look at document/statute, especially one involving penal sanctions, according to its literal term without looking at other sources to ascertain its meaning.

Ordinary meaning of the disputed provision of law should prevail. Where there is ambiguity, the interpretation that most favour the tax payer must be adopted.

Taxing status that seeks to appropriate should be interpreted to favour the tax payer.

Pryce v. Momonthshire Canal & Railn, Lord Ellenborough in Warnington v. Forbes. It was applied in the case of S.A Authority v. Tax Board reinforced by Cotness Iron v. Black by Roulatts.

No tax can be imposed on the subject without words in an act of parliament clearly showing an intention to lay burden on the subject.

Aderano v. FBIR

Okupe v FBIR

Cape Brady Syndicate v IRC

Seven Up Bottling Company v. L

Even where there is an apparent lacuna, the court will refuse to fill it, if it will impose charge on a citizen.

Mischief Rule: Lord Donovan in Mangin v IRCIf the literal rule will produce absurdity or injustice them the will of the legislature shall be adopted. The will is found in the Hansard.

Mobil v FBIR, Bello JSC – in construing a statute, regard must be given to cause and necessity of the act and the construction to be put upon it must promote the Act’s purpose and arrest the mischief that the act is intended to deter.

Shell v FBIR – The SC applied equity consideration and gave administrative directive as overriding effect in interpretation of statute.

Justice Niki-Tobi in Phoenix Motors v NFTMB

If a statute is revenue oriented then it will be part of second public policy to give it to a court of law to custome it and give a liberal interpretation

Note: In case of tax avoidance, mischief rule is always used.

Greenberg v. IRC, Associated Newspapers v. Fleming

  • Foreign decisions in Nigeria are merely persuasive since 1963.
  • Principal legislations and their amendment. Principal statutes must be read in context of their amendment
  • Tax cases can be filed in the Federal High Court or the tax appeal Tribunal. S.251 of 1999 CFRN provides for the jurisdiction of the FHC.

S.13 of the Fifth Schedule to the FIRS Establishment Act.  Provides for the Tax Appeal Tribunal.

  • In matters relating to PITA, cases are to be field in State High Court. Wilbor v. AG Akwa Ibom
  • Appeals from Tax Appeal Tribunal goes to Federal High Court, Appeals from FHC goes to the Court of Appeal.



The power to impose tax can be found in the constitution because taxes must be imposed by legislation. S. 4 of the 1999 CFRN.

Legislation comes from the power to legislate which is contained in the exclusive and concurrent legislature lists. The powers conferred on the state House of Assembly. Eko Hotel v FBIR, Abemagba v A.G Ogun

Sec 162 & 163 of the CFRN provides for the powers of the National Assembly.

All the items on the exclusive legislature list, the National Assembly can decide to impose tax on any of those items.


There is no equity about the tax. Tax must be demanded by statute. No government agency can mandate you to pay tax without the backing of a legislation and the legislation must be constitutional.

This legislation gives the agency taxing powers. The issue of taxing power was the major issue in the case of Aberuagba v. Attoney General of Ogun State. Specifically noted is the judgment of BELLO JSC (as he then was).

The taxing powers of the government are rooted in the constitution. They are contained in the Exclusive and current list. Also, they can be found in the residual powers. Eko Hotel v FBIR

The Federal Inland Revenue Service Act of 2007

N.B Look at the earlier constitutions, prior to 1999, and look at how the sales tax was regulated in those constitutions.

In 1963 Constitutions, Sales tax on matters involving transactions happening interstate where under the competence of state government.



This is an introduction of how government spends money and a projection into government spending.

Government uses money for a lot of things

  • Protection of lives and property
  • Provision of infrastructure and economic development

The concept of public finance, apart from ensuring that government meets it responsibility as stated in the constitution, it also ensures.

How does government fund its responsibility?

Visit the Federal ministry of Finance websites.

Budget is a manifestation of how government intends to meets its needs.


Analysis government budget expenditure and revenue generation soap map. Revenue generation could come from borrowing and in fact internal generated revenue (exportation Tax etc.). Thus, recognizing this where a government borrowing strength is way above the income generated, then the government finance would be said to be in defect.

Leverage Financing of Government (deficit) effect of the government. e.g., most of the income of the government would go into debt servicing and it couldn’t.

The expenditure of government is manifested through the relevant sectors and minority of government. The standard on how the budget should be distributed have been specified e.g., UNESCO guidelines have prescribed that 20% of the budget on education. However, in Nigeria and many countries, this is grossly ignored. However, if the money that government has seems to be misappropriated as the money would not be used for the required sector. Thanks to the deficit nature of financing.

For example, oil price which is indigenous to us, is not usually determined by us as it an international product. However, if there is a government of oil in the international market (the value price reduces) while if there are factors beyond control and the oil becomes scarce then oil becomes expensive.

Thus, if government projects finance on oil, the revenue generated would vary and this would adversely affect the public finance of the country.

Inadvertently, the nature of the country being oil consuming, our demand power would be high, when oil prices are law. This would them affect public finance revenue from oil.

This would then resort to relying on tax which is a revenue generating system, thus mechanisms have to be set in place to increase revenue generated by tax.

  • Recognizing informal sector
  • Awareness
  • Tax incentives, no matter who the tax prayers are
  • Extending the tax net
  • Reduced tax.


Tax evasion or avoidance is one of the various problems affecting the tax systems in Nigeria. This problem increases every year, more or less. The problem is prevalent because there is no comprehensive legislation to curb this menace also, the tax system in Nigeria is characterized by inadequate skilled tax personnel.

Tax evasion and tax avoidance, though interconnected, mean two separate things entirely.


This is the minimization of tax liabilities by so arranging one’s affairs so as to take advantage of provisions in the tax law. In this way, the taxpayer only pays less tax than he is liable for and expected to pay. Some feel tax avoidance is legal. However, this is not so as tax avoidance then limits the amount of revenue that should be generated by the government for public good.

Judicial Approach to Tax Avoidance

Some judges are of the view that it is not illegal except it goes against a clear and expressly stated statute that prohibits it.

IRC v Fisher’s Executers

A limited liability company with undistributed profit resolved to capitalize on the profit by sharing it to its ordinary shareholders at 5% debenture stock each. This was done so as to prevent the shareholders from paying super tax on the 5% bonus. The court per Lord Summer held that the debenture stock was not an income and thus was not meant to be taxed. This was the trend in judicial reasoning especially during the pre-World War period.

IRC v Fisher’s Executives was used as a judicial precedent to Pullman Motor Services and Anor v IRC. However, after the world war, judges realized that tax avoidance was not commendable. In Latilla v IRC per Viscount Simon LC- Tax avoidance should not be seen as commendable as it does not show duties of good citizenship. Also, it increases the burden of tax on the good citizens who desire to pay their taxes.

The case of Howard De Walden v IRC also followed Latilla v IRC.


Tax avoidance in Nigeria is not easy as most employers/employees do this to limit their tax liability especially limited liability companies. To curb this menace, section 17 of CITA provides that where a company is managed by five persons or less and has failed to distribute to its shareholders as dividends, profit made in any of its accounting periods in order to reduce its tax liability, the tax authority should deem the profit as being already distributed. Provided that such profit if distributed would not be to the detriment of the company or such profit is for the management , development, maintenance or expansion of the company. If this proviso is not fulfilled, then the profit or income would be taxable on each of the shareholders as personal income. This section can be compared to IRC v Fisher’s Executers. This section has been criticized to be ambiguous. It is recommended that it should be amended to be more comprehensive.



Tax is an exception to the right to own property. The general rule of tax statutes is that what is not expressly stated in a tax statute cannot be imposed on a tax payer.

Tax provisions must be express and tax laws must have changing provisions that impose tax. This is in relation to tax being an exception to right to own property, one cannot be taxed on his property without an express provision creating such tax. It must be clearly stated.

PARTITING v AC: The court held that if the state intends to impose tax on a subject, it must be brought within the letters of the law , regardless of the hardship to make it an actual tax . Where this is not the case, the subject is a free man, regardless the law intended he be taxed. Thus, there is no common law on taxation and no tax without representation.

Rules of Interpretation of Taxing Statutes.

  1. A person cannot be taxed without the clear words of a tax statute imposing tax on him. Partinting v AG, Tennant v. Smith
  2. The words of a tax statute must be given their natural and ordinary meaning. IRC v Hinchy per Lord Reed.

–        Necessary to distinguish between natural and ordinary, if at all there is any difference. For example, VAT is a tax on items such as food items with exceptions to basic food items.

–        What makes a food item basic?

–        There are some of the challenges with respect to natural and ordinary interpretations.

  1. The underlying principles of taxation should not be read into a tax statute where such underlying principles remain unexpressed. Cape Brandy Syndicate v IRC– the court held that there is no room for intendment in a tax statute because there is no equity about a tax.
  2. When there is ambiguity in the provision of a statute, that ambiguity would be resolved in favour of the tax prayer
  3. In the extreme, the words of a tax statute should be given their ordinary meaning even where such would provide tax avoidance. Margin v IRC, IRC v Wolfson. This is no longer fashionable, however what is the extent to which people can go to ensure that they avoid tax. Judges should be influenced by the sole purpose of tax which is to generate revenue for the government.

Forms and Substance

It is the duty of the law to see beyond the form. Nigerian courts are held down by technicalities a lot of times.

Reiss Nig Co v FBIR

Reiss Nig Corp. is a subsidiary in Nigeria. They were acting as an agent of their Amsterdam parent company. The court said that the entity of Reiss Nig. is different from the entity of Reiss Amsterdam and you cannot impose tax of Reiss Amsterdam on Reiss Nigeria. Our courts usually limit themselves to the form and do not look at the substance. Mobil Oil Nig v. FBIR , Marina Nominees v. FBIR

Mobil Oil Nig v FBIR

The court looked at their statements and said that they usually earned more than that and should pay more. They then gave them additional assessment. They took it to court and it was held that if the court felt that it was to give additional assessment, then they had to pay.

Shell v FBIR

The supreme court introduced the doctrine of equity and that questioned the knowledge of the supreme court justice on the subject of the law of taxation.



Real property means land. Land use charge applies to real property and land is anything attached to the soil.

Land Use Charge Act 2010 interprets property including buildings any improvement of land, a parcel of land whether or not reclaimed, waterlogged or otherwise. Hence, all these things can be taxed.

Improvement on land means buildings, structure, fixture or fence created or affixed to the land. It also includes a moveable structure that is designed to be occupied for residence or business purposes.

Nature of Property Tax

Property tax is not imposed on income or expenditure like capital gain tax which is imposed on income on the disposal of an asset. Rather, what is taxed is ownership and occupation of real property and usually the amount that is damaged is based on the value of the property. Hence, even where the owner of the land does not derive any financial benefit from the land, he would still pay tax. Property tax has been described as an untapped gold mine because it is easy to administer and it is extremely difficult to invade. Property tax plays various roles as a type of tax. The primary role is that it is  a source of revenue especially for the local government. It also has non-physical roles that it plays. e.g., It is used to influence development in an area. In Kenya and South Africa, the government taxes vacant land to pay lesser tax.

Land Based Tax in Nigeria

There are various property taxes in Nigeria and they have different laws that regulate them. In Lagos before 2001, property tax was fragmented; there were various laws imposing tax e.g., Land Rate Law 1984 (only to government allocated property), Neighborhood improvement Law (private property), Tenement Rate Law (property leased out, section 51).

In 2001, the Land Use Charge Law 2001 phased out all these different fragments of property tax laws, and it brought them together and charged it under the law. Section 51, Tenement Rate defines tenements as lands with buildings on it which is held or occupied as a distinct or separate holding or tenancy but does not include lands without buildings.

Shell v Buruntu LGT  defined tenement as buildings on land and all other immovable property which are permanently attached but does not include vacant land. Tenement rate was imposed on the occupier but where the occupier is the owner, the occupier or owner would pay.

The Land Use Charge Law 2001 did not expressly repeal the 3 existing tax statutes or laws in Lagos relating to property tax, rather what he did was to phase out the three existing laws. At that time, there was a lot of concern that a property might be subject to double taxation. There was also the controversy that the Act increased the tax rate or property in Lagos state. The rates were however reduced.

In 2018, another law was enacted which repealed the 2001 Land Use Charge Law. The aim of the 2018 law was to block the loophole in the previous law and the tax rate. The current law is the Land Use Charge Law, 2018. It has 37 chapters and has a better structure. It has 1 schedule.

Chapter 1 is the interpretation section which defines important aspects in the law. Land Use Charge was also defined as all landed property. It shows that this current law consolidates the previous 3 laws.

Section 2 and Section 4 shows that all real property in Lagos state shall be taxed, except those exempted.

Section 4(2), (7) CFRN vests the power to impose tax on the State House of Assembly due to the doctrine of covering the field. Part 1 and 2 of the 2nd schedule CFRN shows what the federal government and the state government can legislate on.

Property tax is based on the value of the property; hence it is not what the National Assembly can legislate on. This leaves it in the purview of the State House of Assembly.

Section 7(4) CFRN empowers the state to impose property tax by passing legislation to that effect. Local governments do not have the legislative powers to do this. Ardin Ventures LTD v Chairman of Abuja Municipal Area Council.

Levying and collection of the Land Use Charge

The 4th schedule of the CFRN contains the functions of the local government  Paragraph 1(j) states that the assessment of privately owned houses and tenement for the purpose of collecting and levying such rates as may be prescribed by the State House of Assembly.

However, one of the issues here is that it expressly states “privately owned houses and tenement”. Hence, does it mean that the local government cannot collect taxes on properties that are not privately owned houses.

Section 2(2) Land Use Charge 2018 provides that the Local Government has the authority to collect, access and levy property tax in Lagos state. However, section 2(3) empowers the local government to delegate that power in writing to the state. There have been a lot of disputes against this section and the provisions of the constitution. Knight Frank Rodley v AG Kano State, AG Cross River State v Odua, Grinaker v Board of Internal Revenue Rivers State.

Item 1(j) First Schedule CFRN only empowers the LG council to tax privately owned houses tenement based on the narrow definition and the literal interpretation of tenement which was provided by the constitution. Do you think that the taxation of property-based houses in Lagos State which are rather privately owned houses in tenements can be successfully challenged?

Can property which are not permanently affixed to land e.g., tents and containers be taxed under Land Use Change?

Properties Liable to Land Use Charge Act

Section 4 Land Use Charge Law provides that all real property in Lagos State is liable to Land Use Charge except those exempted by section 12

Section 12(2), Land Use Charge, the commissioner of Finance grant exemption to a property used by a non profit

Section 9(1), (2) shows those liable to pay Land Use Charge

–        The owner of the property

–        The occupier holding a lease of 10 years and above

–        The occupier of a lease of less than 10 years.

Section 15 provides that where the owner is not in possession, the collecting authority may appoint in writing, including the owner to be the agent of the owner/occupier. The appointed agent is entitled to be indemnified. The usual practice is that the owner includes a gross- up clause to ensure he receives the complete payment that he is to receive from the agreement, free of any subtractions, including tax. The  gross- up clause transfers liability from the owner to the lease/ tenant.

Total Nig. Plc v. Moshood Akinpelu

This case challenged the gross up clause. It started that the statute did not compel the source of money paid as tax and the court was reluctant to provide an opportunity for the parties to breach their contract. This case legalized the transferability of tax burden. Hence, one can shift has tax burden to another by means of contract.

Assessment of Land Use Charge 

Paragraph 1(j), 4th schedule grants the functions, collection, assessment and levy of Land Use Charge Act on the local government. Contrary to the provisions of the constitution, Section 5 of the Land Use Charge Act provides that the commissioner of Finance shall undertake the assessment of Land Use Charge Act in Lagos State on behalf of the state government.

Section 10 provides for the assessment formula for determining Land Use Charge and it is payable annually. It provides that to arrive at the Land Use Charge payable, the market value of the property shall be multiplied by the applicable relief rate and annual charge rate. It goes further to say that market value is made up of land value plus building development value.

Relief rate shall be fixed by the commissioner and published in the gazette of the state.

Charge Rate

Section 10(4) is the provision of the charge rate. It states that the annual rate would be set by the commissioner subject to the approval of the House of the House and shall be published in the gazette and at least one newspaper. This section does not make any reference to the rate in the schedule. In the schedule, there is an exemption of rates on properties occupied by pensioners and Lagos state.

There are different rates paid by those occupied by the owner, residential property occupied by someone else.


On receipt of the assessment, a person charged may make an appeal to the Access Appeal Tribunal in writing and the appeal shall be lodged within 30 days of the receipt of demand notice. For an appellant to lodge an appeal, he shall present receipt of payment of a prescribed fee and 25% of the amount accessed.

An appeal of the decision of the Appeal Tribunal can be taken to the State High Court.

Section 31 provides for the penalties of default. A person who fails to pay Land Use Charge 30 days after receipt of his demand notice shall pay an increased charge as follows;

45- 75 days of default would attract a 25% increase.

75- 105 days of default would attract a 50% increase.

105- 135 days of default would attract a 100% increase.

Anyone who defaults for more than 135 days shall have their property liable to receivership by the state or appointed agent until all the outstanding charges and penalties are paid.

A person who obstructs an authorized officer in the cause of his lawful duty or who refuses or neglects to comply shall be liable on conviction for 250,000 naira or 3 months imprisonment. Section 29, Land Use Charge.

Planned Shelter v Abuja Municipal Area Council

It was illegal for the defendant to collect the tenement rate from residents in Abuja when there is no enabling law to this effect. Paragraph 9, part 2, 2nd schedule.

Section 2(2), Land Use Charge, the Local Government is the collecting authority for Land Use Charge of property within its jurisdiction.

Section 2(3) also allows for delegation of collection to the state by written agreement. AG Cross River v. Matthew Odua

The law was challenged in this case, that allowed the delegation of collection of charge to the state. The court held that it was illegal and unconstitutional.

Knight Frank and Rodley v. AG Kano State

The supreme court stated that it was the power of the local government to delegate the collection of rates to the state government.



Why are companies taxed?

Perception of companies as persons:

Where companies are seen as persons, they are persons sui generis who are to own up to responsibilities. The law creates companies as artificial persons of full capacity i.e incorporated companies.

Business companies pursue businesses, earn capital, pay salaries, enter into contracts and corporate social responsibility. They, in doing this answer their true name as persons.

However, all of these activities are geared towards profit making except where they are non-profit organizations e.g N.G.O’s. The focus is on companies that make profit. The notion that they are persons leaves them subject to taxes which is an obligation imposed by law on persons who have earned income as a social responsibility.

Companies need natural persons to act for them and the persons are separate from the companies. A rail exists between them.

Counter Arguments

Some look at companies as the aggregate of those which make it up i.e its shareholders. Hence, they see taking the companies as well as its shareholders amounts to double taxation.

These individuals were influenced by the perception in the 18th century that companies and shareholders are the same. This is called the AGGREGATE THEORY.


Here the company is seen to stand on its own with duties and responsibilities. Hence they can be taxed.

  1. Both theories conflict on the issue. It must be noted that, in response to the first theory, not all profits are distributed. Profit can be retained, distributed or used to expand.
  2. Companies are also taxed for the continuous creation of infrastructures to ease their operations. The financial burden created for the government has to be repaid. Government has to plan for them as contributors to the G.D.P. They create pressure on existing infrastructure

For companies operating differently e.g telecommunication government provides optic fibre and companies profit from it.

  1. As a legal entity, the law  creates such an obligation.


  1. Tax free for companies in the free trade zone to encourage companies. This is to encourage export activities by export companies in the area and to increase the currency base allowing our currency to compete against others.
  2. Other incentives are capital allowance, non-taxing of interest payable on loans etc.

Diversification is to intensify movement from side  to other sources which we have potential in. This is also to minimize importation and encourage productivity of these companies. There can be diversification around oil as we import refined oil.

Diversification promotes companies to emerge and boost the revenue base. This encourages more employment which inturn creates taxable income.

Read CITA S. 9, 10, 11, 12 – 19.

The case of Marina Noninees v. Marina  Norinees Companies Ltd 91983) NWLR


  1. 9 of CITA – The tax authority is allowed to tax every income of companies brought in accrued in, gotten from Nigeria.

What is a company in Nigeria

  1. Nigerian companies or;
  2. Foreign companies

What constitutes the companies’ taxable income.

S . 9 (1) lists items which are taxable

The income of a company is also diverse.

  1. 9 (1)
  • Income on Property: This refers to the income received by owning a property.
  • Dividends, Interests or Royalties: Dividends is the total sum of money paid from a company’s profit  regularly to its shareholders, Interests is the money paid for a sum of money lent or for the delay in paying a debt and Royalties is a sum of money paid by a third party to a person who has actual ownership of the particular goods or patent for the use of such goods or patent.
  • Profit gotten from any Business /Trade
  • Any source of income which is not listed in the Act but are annual
  1. 9 (2) discusses the interest deemed to be derived in Nigeria. It helps to deduct when interest is redeemed to be derived as mentioned in S. 9 (1).

A Nigerian company has taken a loan, no reference to whom the lender is.

Subsection 3 talks about dividends.

Read 9, 10, 11, 12 and 13 – most important

  • Residual lists are the creativity of the state government. In taxing the profit of a company, there are series of profits that can be taxed as can be seen in the CITA from Nigerian Companies and foreign companies.


  1. 11 of the CITA

Foreign loans are from a foreign nation, usually to Nigeria. The payee is the borrower which is most likely Nigeria so, the exception is to encourage the economy of Nigeria. To keep the money flowing

  • They are directed towards capacity building in the country for the industries mentioned in the section. The fact that it is tax free could also help the tax rate.

The foreign companies are not evading taxes, they are also making sacrifices, they’re incentivized.

Subsection 3  is the administration component of it.

  1. 12 of CITA is an administration component of S. 9 (1) (f) so should be read together.
  2. 13 of CITA – it amplifies the basis of tax we have in S. 9 (1) & (2) – interests, S. 13 (1) – general.

Once it can be shown that it is a Nigerian company the profits should be paid to Nigeria whether or not it had been brought into  or received in Nigeria or even whether they were not made here.

  • Global income of Nigerian income is what is targeted; with six exceptions.
  1. (2) talks about the circumstances from which a country not Nigerian can be said to pay taxes to Nigeria land deemed to be derived from Nigeria).
  2. if it has a fixed base of business;
  3. if they have agents here
  4. if they have a single contractor here

Subsection 3 is mundane

  1. 14 – companies engaged in shipping or Air transport.

Subsection 1: All you’ve taken from Nigeria to be deemed to be your profit, the money made from the people and cargo are to be taxed by Nigeria.

The exceptions to this are stop over passengers paying attention to subsection 4. The tax cannot be less than what is provided there, it could be more.

Section 15: Label Undertaking.

Foreign companies which help us transmit messages but, that was then and this is now. There are local entrepreneurs who do this.

  1. 17 – authorized Unit Trust Scheme

Trust scheme is a mutual Trust fund. It is a proper investment scheme.

  1. 18 – Profits of a company from certain dividends. Dividends can be a company’s interest if it is a shareholder of another company e.g parent companies and their subsidiaries.

A parent must always be a shareholder in the subsidiary.

There are other companies that just invest in these other companies.

Under S. 9 (1) which provides for the heads of profits that can be taxed, dividends are part of it.

  1. 19 of CITA – payment of dividend by a Nigerian company.

Taxis deducted from the profit. Also, when the companies pay dividends, the tax authority takes taxes from it. However, there are odd cases.

This section addresses cases where the company claims that there is no profit but it is declaring dividends or when the dividends declared is greater than the profit declared. There is fraud.

The law will add the profit declared plus the dividend declared and tax it as the company’s profit.

The issue is in the case where a company makes less profit this year than last year and they decide to share part of the surplus money (profit) they made last year to their shareholders. The provision of S. 19 means that the tax authority will tax last year’s profit as if it was this year’s profit. This is not fair.

  1. 20 of CITA – Nigerian dividends received by foreign companies – READ ON IT.
  2. 21 of CITA – certain undistributed profits may be treated as distributed.

Where a company fails to distribute dividends, that is, they are trying to prevent paying tax on dividends, the tax authority will treat the undistributed profit as distributed and collect tax on it.

  1. 22 of the CITA – Artificial transaction is another way of avoiding tax.

Where a parent company reduces the real price of the transactions in order to avoid the real amount of tax.

The tax authority will find the market value of these transactions and tax using that value.



  1. 23 (1) (a-s)
  2. 24 – Ascertainment of profits.
  3. 26
  4. 27 – S. 35


  1. 23 (1) (c) Profit of any company in ecclesiastical, charitable or education activities of a public character in so far as such profits are not derived from a trade or business carried on by such company.

However, some churches do business. Profits made from this business are taxable.

We must be able to differentiate between the profit made from businesses and otherwise.

  1. 23 (1) (f) – dividend distributed by Unit Trust
  2. 23 (1) (g) – the profits of any company being a body corporate established by or under any Local Government Law or Edict in force in any state in Nigeria.
  3. 23 (1) (L) – The interest on deposit accounts of a foreign non-resident company provided that the deposits into the account are transferred wholly of foreign currencies to Nigeria.
  4. 23 (1) (m) – The interest on foreign currency domiciliary accounts in Nigeria.
  5. 23 (1) (o) – dividend received from small companies in the manufacturing sector in the first five years of their operation.
  6. 23 (1) q) – The profits of any Nigerian company in respect of goods exported from Nigeria provided that the proceeds from such exports are repatriated to Nigeria and are used exclusively for the purchase of raw materials, plant, equipment and spare parts.
  7. 23 (1) (p) – dividend received from investments in wholly export oriented businesses.

All these profit exemptions encourage expansion in particular sectors, increases liquidation, and inturn helps the economy of the country.

  1. 23 (1) (j) – It is an exception to the general provision on S. 13 (2). It provides that any profits of a company other than a Nigerian company which, but for this paragraph, would be chargeable to tax by reason solely of their being brought into or received in Nigeria.


Gross profit is the general profit without any deduction made from it.

Net profit – this is the profit after deductions have been made. The gross profit cannot be taxed. The net profit is the one that is taxed.

  1. 24

What is the difference between wholly and exclusively?

They are the same. An expense may be incurred wholly and exclusively but it may be unnecessary or unreasonable.

For the purpose of taxation (“money needed to be invested to make profit”) thus not all money found in the business can be subjected to taxation.

Are there cases where one can expend reasonably but necessary? (“ subjective – objective test).

Personal Opinion

Reasonably – (this would be a question of measure).

Rural investment Allowance s. 24

  1. 24 of CITA – expenses incurred capital Expenditure

Because there are guidelines qualifying this, they must meet the threshold, wholly, exclusively, necessary and reasonably.

Where an expense is made on the generation of profit, it should.

Capital expenditures are expenditures that are very big. The business owner must have incurred the  profit. However, if these expenditures are not taxed, there will be nothing to tax. Hence, the tax has created a certain proportion of allowance to prevent both parties from losing out.

The Rural expenditure allowance is given where a business is far from facilities like good roads, water and so on.

Section 35 – Nuances given.


All of the qualifying expenditures are in the second schedule.

Allowances help companies to grow.


Stamp duties are a form of tax levied on written documents.

  1. 2 of the Act defines an instrument as including every written document, however, not all documents are chargeable under Stamp Duties Act. Not all documents that are written are chargeable; some are exempted.

Stamp duties are one of the oldest taxes in Nigeria. However, for a longtime it remained redundant until recently when the government started looking for ways to generate income.

The relevant law is STAMP DUTIES CAP 144 1939.

The Act is divided into two parts

Part I – General Provisions

Part II – Regulations with

Chargeable documents

  • Power of Attorneys: This is a legal document which gives the Attorney or an agent as well, the authority to act on behalf of another.
  • Bonds: This is a fixed income instrument which serves as a loan made by an investor to a person willing to borrow.
  • Bill of Exchange: It is usually a written order used in International trades and it binds a particular party to pay a fixed amount of money to another party when demanded or at a predetermined date.
  • Agreements: This is a legally binding agreement or contract between two parties for a particular course.
  • Conveyances: It involves the drafting of deeds whereby any interest, title or rights in tangible immovable property is conferred from one person to another.
  • Receipts: This is a document provided by a company which shows proof of either full or partial payment from its customers for a service or purchase of a product.

There are also exceptions.

One of the exceptions is in respect of receipts. Item 4 exempts receipts given from money deposit or withdrawn from a savings account in any bank. It also exempts agreements where the value is less than 10 naira.

  1. 22 (9) deals with the eligibility of instruments to stamp duties. It provides that for an instrument to be chargeable, it has to be executed in Nigeria, or related to any property, matter or thing to be done in Nigeria.

Under the Stamp Duties Act, there are two modes through which stamp duties may be arrived at

  1. Flat rate: This is a rate of taxation which is not progressive but remains at the same proportion.
  2. Ad valorem: This form of taxation is calculated as the percentage of the value rather than the quantity or weight of a real or personal property

The flat rate remains the same despite the value of the transaction while the ad valorem changes (increases) with the value of the transaction.

There are three ways through which payment of stamp duties can be made.

  • Adhesive stamp: This is a postage stamp which does not require any substance to make it adhere to papers or be affixed to a particular document. It is used to make payment for stamp duties.
  • Commissioner for Stamp duties: They administer the provisions of the act and they also supervise the stamp duty office and payment of stamp duties can be made through them.
  • Direct deduction from commercial banks: A direct deduction from commercial banks is also another way payment of stamps can be effected.

Initially, prior to the 1979 (FRN) status it had the power to impose stamp duties. However, after the 1999 CFRN, the Nat. Ass. Have exclusive jurisdiction over it. Item 58 (2) of the second schedule.

  1. 4 (1) 2) empowers the F. G. to impose stamp duties on instruments in Nigeria.

It, Joint Tax Board has advised the F. G. to bring an action to stop states from imposing stamp duties.

  1. 116 empowers the Nat. Ass & the state House of Assembly to modify the duty chargeable on instrument.


The management of stamp duties is vested in the commissioner of stamp duties who is appointed by the president or Gov. from the relevant section of the civil service – S. 6 of S. D. A.

He ensures the proper running of the  office and adjudicates the assessment of stamp duties. He may also be requested to express his opinion with respect to what.

This process is what is called Adjudication.

He expresses his opinion in a certificate.

Appeal from the decision of the commissioner goes to FHC.

  1. 20 of S.D.A provides that where a person is dissatisfied with the opinion of the commissioner of the aggrieved party within 21 days and upon the payment of the duty with which he is dissatisfied appeal against the assessment at the High Court.

The Court shall determine the amount of duties chargeable on the instrument where it believes that the amount is different from what was assessed by the commissioner.


Different instruments attract different sanctions because of the level of importance of the documents. Failure to stamp an instrument is not an offence, however, where you have not paid stamp duties on a document you cannot use it as evidence in court in civil proceedings. The court will order the parties to regularize it.

  1. 22 provides instances where an stamped received. It provides that where an instrument which may be stamped after execution is tendered in a civil proceeding and the presiding judge or magistrate notices that it has not been properly stamped. He is to require the party to pay the stamp duty and the further firm of N20 and such order penalty that may accrue.

Although instruments are generally required to be stamped at the time of first execution, S. 23 (1) provides a grace period  of 40 days for the flat rate and 30 days for the ad valorem rate within which an unstamped instrument may be stamped.

After the expiration of date, the instrument may still be stamped upon the payment of N20.

In 2006, CBN circulated a circular which mandated deposit banks and financial institutions to support the government revenue drive by complying with the stamp duties and deducting N50 from every transaction labore N1000.

In 2014, a company called Kalsma Int’l Ltd acting as an agent of NIPOST filed an action at the FHC urging the  court to compel the banks to charge stamp duties on deposits and to remit the money to NIPOST and the court granted their requests.

Standard Chartered bank appealed in the care of Standard Chartered v. Kalsma Ltd (2017), the court of Appeal ruled in favour of the appedant as there was no statutory basis for the collection of N80.

It also stated that there was no extant law that empowered NIPOST to collect stamp duties. However, the bank has continued to collect stamp duties.


It is a consumption tax. It is also an indirect tax levied at each stage of the supply chain but finally borne by the end user. Manufacturers  pay. VAT on raw materials supplied to them, the distributors pay VAT on goods supplied to them and the consumer pays V.A.T. on the good. It is paid anytime there is a supply of goods and services. Everyone on the supply chain except the final consumer can receive a refund on VAT.

Around the world consumption tax can be referred to as sales Tax, VAT, tax on goods and services.

Initially, the applicable consumption tax was the sales tax imposed by the sales Tax Act 1986 but it was replaced by the VAT Act of 1993 because the sales tax was narrow (covered  only categories). The VAT Decree 1993 has been amended a couple of times, the latest being the VAT Amendment Act of 2000. It has 47 sections and 2 schedules.

S.2 imposes V.A.T. on all goods and services other than those exempted by the schedules. V.A.T. is administered by FIRS.

The 1st Schedule contains the list of exempted goods, they include driers and pharmaceutical products, baby products, basic food, plant and machinery imported for use in the free trade zone provided that 100% of the product of such companies is for export, plants and machineries purchased for the utilization of gas in the downstream oil sector, tractors, ploughs, agric equipments used in the agric sectors.

4 Exempted services, – medical services, all exported service’s service rendered by community banks, people’s banks and banks and mortgage institutions, plays and performances conducted by educational institutions as part of learning.


It is taxed at 5% at the value of taxable goods and services.

It is one of the lowest in the world. The Fed. Executive Genial has approved the increase of VAT from 5% to 7.5%. However, it will not be implemented until the statute is amended.

Although S. 38 (1) empowers the Minister to amend the rates by an order published in the gazette, there still remains the question of constitutionality.





A person empowered to collect VAT is called a registrable person and since the VAT is collected at every stage, it means that everyone at that stage is a taxable person. Anyone who is not the final consumer can apply for a refund in three ways.

Credit Method

The refund is credited to subsequent tax liability; the taxable person is required to register with FIRS within six months of business or face a penalty of N10,000 for the first month of default and N5,000 for subsequent months. In addition to the people in the supply chain, government ministries and agencies, contractors and non-resident companies are required to register with FIRS. Every registered person is saddled with the obligation to keep records of all transactions relating to the taxable goods.


Taxable persons are required to make returns on goods and services on or before the 21st of the following month in which the supply was made. S. 16 of V.A.T Act failure to do so attracts a sum equal to 5% per annum plus interest which shall be added to the total amount payable and he shall be notified. It will also attract the  best of judgement by FIRS.

A person aggrieved by the judgement may appeal to FIRS. An appeal from the decision of the service shall lie to T.A.T. further appeal shall lie to the Federal High Court.

Basic food items which are exempted from VAT are unprocessed food.

Monamer Khod Ent. V. FIRS (2004)

Warm Spring Waters v. FIRS (2015)

The question before the court was whether water should fall under basic food items. The court held that water that has been processed is taxable.

There has been an issue about the applicability of V.A.T to intangible goods.

Also,  there has been an issue about the applicability of V.A.T. to non resident companies Vodacom v. FIRS.

Any person except a consumer can apply for refunds – How?

Output tax and Input Tax.

Tax paid by the current Taxable person.

Input Tax is paid by the previous Tax payer.

A taxable person is expected to keep a tax invoice which should contain;

  • Tax Identification Number (T.I.N): It is used as a tracking number by the Internal Revenue Service(IRS). It is a nine digit number.
  • Date of Supply: This is the date in which goods are made available to the buyer or purchaser.
  • Name and address of Tax payer: The tax invoice must contain important items like the name and address of the taxpayer.
  • VAT registration number: This is a unique code usually issued to companies that are registered to pay VAT.
  • Name of purchaser / Client: The name of purchaser or client should be included in the tax invoice.
  • Gross Amount of Transaction: This is the total amount spent or used for the transaction.
  • Tax Charged: The tax charged for a particular transaction must be present in the tax invoice.
  • Rate supplied: The rate of the goods supplied must also be present in the tax invoice.