Tax Waivers; A Tool for Encouraging Tax Compliance

The Concept of Tax Waivers

Tax waivers are intentional acts of the relevant tax authority to relinquish or let go of a known right or claim to existing tax liabilities. Tax waivers can come in form of amnesty for back taxes, amnesty on penalties and interest, tax holidays/reliefs and tax exemptions. They are usually employed in order to incentivise various sectors of the economy or various categories of taxpayers, but ultimately to enhance tax revenue, voluntary tax disclosures/ payments, widening of taxpayer database, and enhancement/improvement of trade, industries and investments.

In spite of also having its down sides (particularly abuse of the process), tax waivers which have been successfully implemented have helped in:

  • Enhancing tax revenues ultimately
  • Reducing the cost and time of tax collection for both FIRS and the taxpayers
  • Engendering trust of the taxpayers in the tax authorities and collaboration between the two parties
  • Encouraging growth and investments in particular economic sectors
  • Easing tax compliance burdens on certain categories of taxpayers e.g. small businesses and thereby encouraging an enabling business environment around them
  • Instituting voluntary tax compliance culture ultimately
  • Enhancing cross border trade and investments
  • Widening the taxpayer database
  • Enabling tax defaulters to come clean and engendering the culture of tax compliance going forward

John F. Kennedy also alluded to the efficacy of tax waivers in his statement, “It is a paradoxical truth that tax rates are too high and tax revenues are too low, and the soundest way to raise the revenues in the long run is to cut tax rates

As part of the efforts of the Federal Inland Revenue Service, (FIRS) to promote voluntary compliance in Nigeria, it has recently approved a long expected tax waiver window as follows:

  1. Waiver of penalty and interest on all taxes administered by FIRS.
  2. This special waiver window will be opened for 45 days only, commencing 5th October 2016.
  3. The waiver is applicable only on penalty and interest and not on principal due.
  4. The waiver covers only a 3-year tax default period; 2013 to 2015, i.e. penalty and interest accruing on all taxes due between 2013 and 2015.
  5. The waiver covers all taxpayers (with regards to taxes payable to FIRS) in default.
  6. The remedial taxpayer is expected to present a payment plan on the outstanding Principal Tax Liability, acceptable to FIRS. Part payment/full payment of undisputed tax liabilities is to be paid, while the balance could be paid instalmentally, however, it is expected that a reasonable amount of not less than 25 per cent be paid on account.
  7. Applicants who want to take advantage of this special waiver window are expected to apply officially to FIRS.

The waiver has been approved to allow remedial actions from otherwise non-compliant taxpayers.[1]

Non-compliant taxpayers may include:

  • Start-up businesses not yet acclimatized to its business or regulatory environment, and still struggling to survive.
  • Operators in the informal sector, without an iota of knowledge of what taxes they should pay.
  • Persons not at all registered for tax or registered but have not started paying any taxes.
  • Persons registered for tax with their bankers just for the purpose of collecting tax identification number for opening of business bank accounts. Such taxpayers do not have tax files with any tax office where they can file their tax returns. They are expected to go to their nearest tax offices and register appropriately for tax.
  • Taxpayers collecting value added tax, deducting withholding taxes and not remitting them.
  • Persons simply evading taxes, either by non-filing or by not disclosing incomes subject to tax. Several taxpayers in this category run several bank accounts and have employed different means of receiving incomes, while only disclosing a very small portion of those incomes.
  • Citizens stashing undisclosed funds outside the country, in the so-called tax havens
  • Taxpayers owing significant amounts in arrears of taxes due to inconsistency in tax payments or incorrect/incomplete self-assessments over a significant length of time.
  • Taxpayers who are simply aggrieved or distrusting of the tax system and so have simply decided not to pay taxes.
  • And all such others who for whatever reason, other than legal exemptions have not been fully compliant to taxes.

It is the belief of the FIRS that the contemplated tax waivers, would among other benefits, boost tax revenues and increase the number of taxpayers in the FIRS database by between 500,000 and 700,000 taxpayers. FIRS also believes that these measures will go a long way in easing voluntary tax compliance by taxpayers.

Several countries world over have also implemented tax waivers in form of tax amnesty. Most were successful, few were either not successful or were abused. Some cases are enumerated below for the enlightenment of our readers.

Ireland: In 1988, the Irish government introduced a comprehensive proposal that gave delinquent taxpayers ten months to pay overdue taxes without incurring any interest or penalty charges. According to the Central Bank of Ireland, the tax amnesty raised approximately 750 million dollars. This windfall again helped in reducing the treasury’s total borrowing requirement to approximately 34 percent of GDP in 1988, compared to 10 percent in 1987[2]. Other countries that implemented tax amnesty successfully in the 80’s include India, Argentina, Colombia, France, Belgium[3].

Italy: Introduced a tax amnesty in 2001 that came to be known as Scudo Fiscale which was extended in 2003 in other to recoup money from funds stashed outside the country. In 2009 the Italian Amnesty yielded €80 billion, while the Bank of Italy estimated that Italian citizens held around €500 billion in undeclared funds outside the country[4].

South Africa: The 2003 tax amnesty Regulation allowed South African residents to disclose their foreign assets, accumulated or transferred in contravention of Exchange Control without being exposed to any civil or criminal liability. Defaulters were given a time frame of 3 months to pay their default fee of 5 per cent for repatriated foreign assets and 10 per cent for foreign funds remaining offshore. In the 2003/4 offshore amnesty package, 42,000 South Africans came clean raising R2,9 billion in levies with R48 billion of the R69 billion declared having been held offshore illegally[5].

Germany: In 2004, tax amnesty was granted by the German government. It was in respect of deposits and capital belonging to Germany’s war time generation. The tax amnesty generated up to 2.6 million Euros. Since 2004 when it was granted, more than 36,000 requests for tax amnesty were filed in Germany[6].

Russia:  In 2007, a Russian tax amnesty programme generated $130 million in the first six months. The Russian programme was not open to anyone previously convicted of tax crimes such as tax evasion. This was done in a bid to encourage non-compliant tax payers to regularize their tax affairs and also to boost tax revenues and reverse capital flight from the country[7].

Jamaica: The tax amnesty programme ran in Jamaica from June 30, 2008 to October 31, 2008. The tax amnesty covered all tax types; income tax, PAYE, property tax, general consumption tax, special consumption tax, education tax, transfer tax, stamp duty, asset tax, and contractors levy.

United States of America (U.S.A.): A federal U.S. tax amnesty was granted to more than 14,700 American taxpayers in the year 2009. The city of Los Angeles collected $18.6 million in its 2009 tax amnesty programme, claiming that the amount was $8.6 million more than was expected and that businesses saved $6.7 million in penalties. The State of Louisiana brought in $450 million from its 2009 tax amnesty programme, which was three times more than what was expected, according to Republican Governor Bobby Jindal[8]. Massachusetts raised $85 million through a tax amnesty programme while New York collected more than four times that amount.

Greece: On September 30, 2010, the Hellenic Parliament ratified a legislation pushed through by the Greek government in an effort to raise revenue, granting tax amnesty to millions of Greek citizens by paying just 55% of the outstanding debts[9]. But in 2011, the European commission requested Greece to modify its tax legislation as its tax amnesty was considered discriminatory and incompatible with European Union treaties[10].

Ghana: In 2012, Ghana also implemented a tax amnesty programme, granting reprieve to tax defaulters, and seeking to widen the income tax net to improve Ghana’s revenue inflows. The amnesty covered both registered and non-registered tax payers. The condition for benefitting from the amnesty was registration with the Ghana Revenue Authority or the Registrar General’s Department, submission or amendment of their tax returns and paying outstanding taxes within a certain time frame.

Spain: In 2012, the Minister of Economy and Competitiveness, Cristobal Montoro announced a tax evasion amnesty for undeclared assets or those hidden in tax havens. Repatriation would be allowed by paying a 10 percent tax, with no criminal penalty and it applied to personal income tax, corporate income tax and non-resident income tax as long as they were voluntarily disclosed to the Spanish tax authorities by November 30, 2012[11].

Portugal: Portugal's regularization regime entered into force on November 1, 2013 and ended December 2013. The measure was designed to boost tax revenues, and to enable the Government to meet its public deficit target of 5.5 percent of gross domestic product from the other year. The scheme accorded exemption from the payment of default interest, compensatory interest, and administrative fees. In addition, the provisions reduced the fine to 10 percent, in cases where the legal tax debt recovery period ended on August. Portugal's State Secretary for Tax Affairs Paulo Nuncio announced that the process yielded "a record sum" of EUR1.25bn (USD1.7bn) for the state, easily surpassing the initial target figure of EUR700m[12].

United Kingdom: Tax amnesty has not been generally applied in the United Kingdom. The Board of Inland Revenue has however admitted that it has recovered over £2 billion from tax deals with Switzerland and Liechtenstein. All they had to do was to open accounts in Liechtenstein or Switzerland and all their offshore tax dodging could be included in a settlement even without them transferring any money 1. Though this still earned criticism from some revenue critics who said it was not the job of the Revenue to help tax evaders to mitigate their risk of tax penalties.

Indonesia: Indonesia’s first period of tax amnesty program, ran from July to 30 September this year. The programme offered the most attractive tax rates to those taxpayers who had not fulfilled their tax obligations in recent years. Through the government’s tax amnesty programme they could declare previously undeclared assets and – if they have assets abroad (for example in the so-called tax havens) – they were encouraged to repatriate these funds into Indonesia through attractive tax incentives and immunity from prosecution, a move that met resistance in Singapore.

Several big Indonesian businessmen publicly announced to support the program and repatriate offshore funds into Southeast Asia’s largest economy. The government and the nation’s financial authorities had prepared several investment instruments for these funds (allowing to absorb excessive liquidity in case the program is a huge success).

According to the data from Indonesia’s Tax Office on Thursday 15 September 2016, additional state revenue (from taxation) that was earned through the tax amnesty program stood at IDR 22.7 trillion (approx. USD $1.7 billion), or 13.8 percent of the government’s target (IDR 165 trillion). Ken Dwijugiasteadi, Director General of Indonesia’s Tax Office, indicated that since the start of September 2016, additional government tax revenue (collected through the amnesty program) averaged between IDR 1.5 – 2 trillion per day, a very strong performance[13].

Tax Exemptions/ Incentives Already Existing in the Nigerian Tax System

In Nigeria today, there are many tax exemptions/ reliefs already inherent in the tax laws and from which taxpayers have benefitted and could still benefit, only if they are aware of their existence. Taxpayers must not necessarily wait for special tax waiver programmes before they can come forward voluntarily to file tax returns and remit the associated taxes. Many of these plethora of tax incentives inherent in the different Nigerian tax laws are enumerated below for the enlightenment of our readers:

Exemptions under the Companies Income Tax Act (CITA)

 1. General exemptions under CIT- incomes exempt from CIT

There are certain companies’ or organisations’ incomes/profits that are within the scope of CITA but are granted exemption from the tax for various reasons ranging from the companies not being profit oriented organisations to incentivizing relevant sectors.

If profit accrues to a taxpayer (company/organisation) in any of the following categories[14], the profit is exempt from CIT as long as it does not originate from any trade or business carried on by such taxpayer:

  1. Any statutory or registered friendly society that makes profit as long as the profit is not from a trade or business carried on by such society.
  2. A co-operative society registered under any enactment or law relating to co-operative societies; its profits and profits from co-operative activities solely carried out with its members or from any share owned or other interest possessed by it in a trade or business in Nigeria carried on by some other persons or authority.
  3. Any company engaged in ecclesiastical, charitable or educational activities of a public character (e.g. churches, non-governmental organisations and schools).
  4. Any company formed for the purpose of promoting sporting activities and which uses the profits made (from non-trading activities) wholly for the purpose of promoting sporting activities. This exemption is however subject to such conditions as FIRS may prescribe.
  5. Trade unions registered under any Trade Union Act.
  6. Dividends received from Unit Trust Schemes.
  7. A body corporate established by or under any Local Government Law or Edit in force in any State of Nigeria.
  8. Corporate organisations that serve as purchasing authorities established by an enactment and empowered to acquire any commodity for export from Nigeria and for the purchase and sale (whether for the purposes of export or otherwise) of that commodity.
  9. Any company established by the law of the state for the purpose of fostering the economic development of the state.
  10. Any profit of a company other than a Nigerian company which is not taxable for any other reason apart from the fact that it was brought into or received in Nigeria.
  11. Dividends, interest, rent, or royalty derived by a company from a country outside Nigeria and brought into Nigeria through "Government approved channels"[15].
  12. The interest accruing on foreign currency deposit accounts of a foreign non -resident company.
  13. The interest accruing on foreign currency domiciliary account in Nigeria.
  14. Dividends received from small companies in the manufacturing sector, in the first five years of operation.
  15. Dividends received from investments in wholly export - oriented businesses.
  16. Any Nigerian company that exports goods, repatriates the proceeds into Nigeria and uses such proceeds exclusively for the purchase of raw materials, plants, equipment and spare parts.
  17. A company whose supplies are exclusive inputs/raw materials for the manufacturers of exported goods. The company however needs to collect a certificate of purchase of the inputs from the export manufacturer.
  18. A company established within an export processing zone or free trade zone and 100% of its production is for export. Where this is not the case, the percentage of locally consumed production to exports will be applied in determining the tax payable on its business profits.
  • Companies Income Tax (CIT) Exemption on Bonds and Short Term Federal Government Securities

Under the CIT (exemption of bonds and short term government securities) order 2011, incomes and interests arising from the following instruments are exempt from CIT for ten (10) years starting from 2011:

  • Bonds issued by corporate bodies including supra-nationals.
  • Bonds issued by Federal, State and Local Governments and their agencies;
  • Short term federal government of Nigeria securities, such as treasury bills and promissory notes;
  • Pioneer Status Tax Relief

Pioneer profits are profits covered under the Industrial Development (Income Tax Relief) Act. This Act seeks to exempt from Companies Income Tax (CIT) for initial period of three years, which may be extended for an additional two years, profits made by pioneer industries from sale of pioneer products, in order to incentivise those industries where government sees favourable prospects and encourage their growth. A company which is granted this exemption from CIT enjoys what is called ‘Pioneer Status’.

There is currently an approved list of pioneer industries/products but any industry can be included in this list or granted the exemption when an application is made and the pioneer certificate issuing body- the National Investment Promotion Commission (NIPC) identifies a business case for such tax exemption. On application for pioneer relief, a service charge of 2% of projected tax savings over the pioneer period is payable to NIPC.

The industries which are currently mostly targeted for this status include: energy sector, mining, railways/roads, education, health, aviation, sports and agriculture.

  • Gas utilizing companies and mining companies are also entitled to similar tax free periods (3-5 years) under CITA.
  • Exemptions from CIT under certain conditions- Exemption of Profits Order

Under the CIT (exemption of profits), Order issued in 2012, there are three situations giving rise to exemptions from income tax:

  • Employment tax relief: In any assessment period, any company with a minimum net employment (difference between incoming and outgoing employees) of 10 employees of which 60% are employees without any form of previous work experience, employed within their 3 years of graduation from school or any vocation, shall enjoy an exemption from income tax of 5% of its assessable profit in the assessment period (limited to the gross salaries of qualifying employees) in which the profits were generated.
  • Work experience acquisition programme relief: Any company that has a minimum net employment of five new employees and retains such employees for a minimum of two years from the year of assessment in which the employees were first employed shall enjoy an exemption from income tax of 5%of its assessable profits in the assessment period in which the company qualifies.
  • Infrastructure expenditure tax relief: According to the provisions of the Order, any company that incurs expenditure on infrastructure or facilities of a public nature shall be entitled to claim additional tax deductibility in this regard to the tune of 30% of the cost of the provision of the infrastructure or facilities in the period in which the facilities were provided. These amenities/infrastructures must be accessible to both the Company and the public and must be in use before the exemption can apply. Certification from the Company’s auditors is also required in this regard.

Note that both reliefs above are only applicable for full time Nigerian employees who are not related by blood. Adjustments shall be made to the number of qualifying employees to exclude those with relationship ties. A certification is also expected to be issued in this regard by the Company’s external auditors before the exemptions can be allowed.

Interest Income Exempted

  • Interest on loan granted by any bank to a company in Nigeria engaged in:
  • agricultural trade or business;
  • fabrication of any local plant and machinery or
  • providing working capital for any cottage (home) industry established by the company;

is exempted from tax (including withholding tax), provided that the moratorium period is not less than 18 months and the interest on the loan is not more than the base lending rate at the time the loan was granted.

Interest on foreign loans is exempt from tax (including withholding tax) as follows:

  • If the repayment period is above seven years and grace period is not less than 2 years- 100% tax exemption
  • If the repayment period is between 5 to 7 years and grace period is not less than 18 months – 70% tax exemption
  • If the repayment period is between 2 to 4 years and the grace period is not less than 12 months – 40% tax exemption
  • If the repayment period is less than 2 years- no tax exemption

Dividend Income Exempted

No tax is deductible from or payable (in the hands of the recipient) on dividends paid out by a Nigerian company as follows:

  • Dividend settled/ paid by the issue of shares in lieu of cash
  • Dividend paid out of profits exempted from CIT under the CITA [See section 18, subsection 1 (c; ii), read in conjunction with section 43 (1) of CITA]
  • Dividend paid out of pioneer profits
  • Dividend paid out of petroleum profits

Provided that the company paying the dividend issues a certificate to each of its shareholders setting out the amount of dividend to which such shareholders are entitled and the profits from which it has been paid.

Common Wealth Tax Relief

Nigeria is a member country of the Commonwealth of Nations. CITA therefore grants tax relief to any Nigerian company which proves to the satisfaction of the tax authority, that it has paid or is liable to pay Commonwealth Income tax for any year of assessment on any part of its profits to which it is also liable to pay tax (or has paid tax on) in Nigeria. The tax relief is the Commonwealth rate of tax[16] subject to a limit of half of the CIT rate (15%).

In the case of a non-Nigerian Commonwealth country liable to tax in Nigeria but has paid Commonwealth income tax on the same profits, the relief to be given from CIT shall be half of the Commonwealth rate of tax (if the tax rate does not exceed the CIT rate). If the Commonwealth rate of tax exceeds the CIT rate, the relief to be granted will be limited to the difference between the CIT rate (30%) and half of the Commonwealth rate of tax.

Double Taxation Relief

Double tax relief (which supersedes the Commonwealth tax relief, wherever it is in place) is granted under CITA where there is a Double Taxation Agreement (DTA) in place between Nigeria and any other country. A double tax agreement is a reciprocal arrangement whereby two countries agree not to tax the income of individuals or companies brought or received into their territory if such individual or company had already paid tax on such income in the other country.

There are several methods of calculating double tax relief under CITA.

Nigerian tax treaty relations can be categorised as follows:

  • Treaties in force in Nigeria: United Kingdom, Pakistan, Belgium, France, The Netherlands, Romania, Canada, South Africa, China and DTA relating to air and shipping signed with the Italian Government.
  • Treaties concluded but not ratified by the National Assembly: Spain, South Korea, Sweden and
  • Treaties concluded but yet to be signed: Mauritius, Algeria and Denmark.
  • Concluded treaties requiring re-negotiation: Bulgaria and
  • Concluded treaties requiring clarification on date of entry into force: Philippines, Czech Republic and
  • Treaties due for the second round of negotiations: Syria, Iran, India, Ethiopia, and
  • New countries selected for new tax treaty negotiations by Nigeria: Qatar, Japan, The United Arab Emirates, Ghana, Sierra Leone, Kenya, Cameroon, The Gambia, Kuwait, Equatorial Guinea and
  • Countries which have approached Nigeria for new tax treaty negotiations: Liberia, Kuwait, The United Arab Emirates, India, Poland and Egypt.

Exemptions under the Export Processing Zones (EPZ)

One of Nigeria’s economic goals is to transform the national economy, especially to reduce Nigeria’s international trade deficit and trade imbalance. The following incentives are therefore available for approved enterprises operating within the EPZs:

  1. Companies operating within the EPZs are exempt from income taxes, provided that 100% of the goods produced in the zones are meant for export. Exports from the EPZs into Nigeria which is Customs Territory shall attract the appropriate duty on imported raw materials.
  2. VAT on goods produced in the EPZs is zero rated.
  3. All companies located within EPZs should file tax returns to EPZ authorities even though no tax is payable.
  4. Exemptions from import and export levies and taxes apply within the EPZs, except where the entities transact business outside the EPZs.

Exemptions under the Tertiary Education Trust Fund (establishment) Act 2011

  • Companies without assessable profits
  • Non-resident companies not registered in Nigeria
  • Un-incorporated entities; i.e., companies not subject to Companies Income Tax

Exemptions under the Value Added Tax Act

Exempt goods under VAT:

  • Basic foods items (unprocessed food stuff or agricultural produce)
  • All medical and pharmaceutical products sold/ supplied
  • Books and educational materials
  • Baby products
  • Locally produced fertilizer, agricultural and veterinary medicine, farming machinery and farming transportation equipment
  • Plant, machinery and goods imported for use in the free trade zones
  • Plant, machinery and equipment sold to oil and gas companies in the downstream sector for utilization of gas.
  • Tractors, ploughs, agricultural equipment and implements sold to farmers

Exempt Services:

  • Medical services
  • Services rendered by community banks, people’s bank and mortgage institutions
  • Plays and performances conducted by educational institution, as part of learning

Exempt Instruments:

  • According to the VAT modification order gazette of 2011, all government bonds, government securities and corporate bonds and proceeds thereof (for a duration of 10 years)
  • Asset-backed securities and mortgage- backed securities are also exempted from tax (2010, by presidential order).

Zero-Rated Goods and Services:

  • All non-oil exported goods and services[17]
  • Goods and services purchased by diplomats or embassies
  • Goods purchased for use in humanitarian donor funded projects

Exemptions under the Stamp Duties Act

General exemptions from all stamp duties include:

  • Capital and transfer duties in case of reconstruction or amalgamation of companies, where not less than 90% of the shares of an existing company is being acquired.
  • Transfer duty in case of transfer of property between associated limited liability companies where not less than 90% of either’s share capital is owned by the other or another third party company owning not less than 90% shares in each of them.
  • Transfer of shares in the government or legislative stocks or funds in Nigeria.
  • Instruments for the sale, transfer or other disposition, either absolutely or by way of mortgage, or otherwise, of any ship or vessel or any part, interest, share or property of or in any ship or vessel.
  • All instruments on which the duty would be payable by government.
  • All instruments on which the duty would be payable locally by government in Nigeria or any of the departments thereof.
  • All documents relating to the transfer of stocks and shares.
  • Reduction in stamp duties for re-issues of previously executed debentures to 20% of the stamp duty otherwise payable on a new debenture of the same value (2010, by presidential order).

Exemptions under the Petroleum Profits Tax (PPT) Act

  • Dividends declared from profits on which PPT has been paid is not subject to any tax.
  • Refined petroleum products (white products), including diesel and kerosene.
  • Royalties paid are tax deductible.
  • Tertiary Education tax is also tax deductible.
  • Where a company engaged in petroleum operations is engaged in the transportation of chargeable oil by ocean going oil-tankers operated by or on behalf of the company from Nigeria to another territory, income from such transportation is excluded from PPT. It is however, taxable under the Companies Income Tax Act.

Exemptions under the Withholding Tax (WHT) Regime

  • Goods supplied in the ordinary course of business (that is, directly by the producer/dealer, without involving any middle man. Over the counter purchases are also included under this category).
  • Recoverable expenses, when clearly separated on the invoice.
  • Dividends distributed out of pioneer profits are exempt from WHT.
  • Dividends distributed out of petroleum profits are exempt from WHT.
  • The interest accruing on foreign currency domiciliary account in Nigeria is exempt from WHT.
  • See also ‘interest income exempted’ under exemptions from CIT [See 1 (f) above].
  • See also ‘dividend income exempted’ [1 (g) above].
  • Dividends received from small companies in the manufacturing sector, in the first five years of operation are exempt from WHT.
  • Dividends received from investments in wholly export - oriented businesses are exempt from WHT.

Exemptions under the Capital Gains Tax Act

  • Shares, stocks, bonds and government securities.
  • Mortgage-backed securities and asset-backed securities (2010, by presidential order).
  • Roll-over relief is available for qualifying assets (within the same class) repurchased with the proceeds of the asset(s) disposed.

Exemptions under the Personal Income Tax (PIT) Act

  • Contributions to pension
  • Gratuities
  • National housing fund contributions
  • National health insurance schemes
  • Life assurance premium
  • Consolidated relief allowance of N200,000 plus 20% of gross income, subject to a minimum tax of 1% of gross income, whichever is higher.
  • Asset-backed securities and mortgage- backed securities are also exempted from tax (2010, by presidential order).

Other general incomes exempted from PIT:

  • The emoluments payable from United Kingdom Funds to members of visiting or other Forces and to persons in the permanent service of the United Kingdom Government in Nigeria in respect of their offices under the United Kingdom Government and the emoluments payable to members of any civilian component, and the income of any authorised service organisations, accompanying the visiting Forces: This exemption does not apply to a Nigerian citizen or a Nigerian resident.

All consular fees received on behalf of a foreign State, or by a consular officer or employee of the state, of his own account, and all income of such officer or employee, except income in respect of any trade, business, profession or vocation carried on by an officer or employee or in respect of any other employment exercised by him within Nigeria.

Provided that this exemption shall not apply where the employee is engaged in domestic duties or where the officer or employee ordinarily resides in Nigeria and is not also a national of the foreign State.

  • Interest accruing to a person who is not resident in Nigeria as follows:

(a)      the interest on a loan charged on the public revenue of the Federation and raised in the United Kingdom;

(b)      the interest on a bond issued by the Government of the Federation to secure repayment of loan raised from the International Bank for Reconstruction and Development under the authority of the Railway Loan (International Bank) Act;

(c)       the interest on any money borrowed by the Government of the Federation or of a State on terms which include the exemption of interest from tax in the hands of a non- resident person;

(d)      where the Minister of Finance so consents, the interest on any moneys borrowed outside Nigeria by a corporation established by a law in Nigeria upon terms which include the exemption of such interest from tax in the hands of any non-resident person;

(e)      the interest on deposit accounts, provided the deposit into the account are transfers wholly made up of foreign currencies (funds) to Nigeria through Government approved channels and the depositor does not become non-resident after making the transfer while in Nigeria.

For the purpose of the exemption of interest specified above, a person shall only be deemed to be resident in Nigeria for a year of assessment if he is in Nigeria for a period or periods amounting to 183 days or more in any twelve months’ period commencing in the calendar year and ending either in the same year or the following year.

  • Interest on any loan granted by a bank to a person -

(a)       engaged in -

(i)     agricultural trade or business'

(ii)    the fabrication of any local plant and machinery; or

(b)       as working capital for any cottage industry established by the person under the Family Economic Advancement Programme, if the moratorium is not less than 18 months and the rate of interest on the loan is not more than the base lending rate at the time the loan was granted.

For the purpose of the above exemption also, a person shall only be deemed to be resident in Nigeria for a year of assessment if he is in Nigeria for a period or periods amounting to 183 days or more in any twelve-month period commencing in the calendar year and ending either in the same year or the following year.

  • The income of a national of the United States of America from employment by the International Co-operation Administration, being an Administration or Agency formed and directed by the Government of that country.
  • The income of a national of the United States of America from employment by the International Development Services as agents or the International Co-operation Administration.
  • The income of an individual from employment by the Ohio University of Athens, Ohio, as agent for the International Co-operation Administration, in connection with any Scheme for the training of teachers in Nigeria.
  • An income in respect of which tax is remitted or exempted under the provisions of the Diplomatic Immunities and Privileges Act or of any enactment, order or notice continued in force or affected by that Act.
  • The income of a local government or government institution.
  • The income of any ecclesiastical, charitable or educational institution of a public character in so far as such income is not derived from a trade or business carried on by such institution.
  • Wound and disability pensions granted to members of the Armed Forces or of any recognised national defence organisation or to persons injured as a result of enemy action.
  • Pensions granted to a person under the provisions of the Pensions Act relating to widows and orphans.
  • The income of a trade union registered under the Trade Union Act, in so far as the income is not derived from a trade or business carried on by that trade union.
  • The income of a statutory or registered friendly society in so far as such income is not derived from a trade or business carried on by such society.
  • The income of a co-operative society registered under the Co-operative Societies Act 1993, not being income from any trade or business carried on by the society other than the co.-operative activities solely carried out for and with its members or from any share or other interest possessed by that society in a trade or business in Nigeria or elsewhere carried on by some other person or authority.
  • A sum received by way of death gratuities or as consolidated compensation for death or injuries.
  • A sum withdrawn or received by an employee from a pension, provident or other retirement benefits fund, society or scheme approved by the relevant tax authority, and a sum withdrawn or received by an employee from a national provident fund or other retirement benefits scheme established under the provisions of any enactment for employees throughout Nigeria.
  • Dividends
  • Any compensation for loss of employment.
  • The income of a non-Nigerian citizen, who is in employment in Nigeria, under a Technical Assistance agreement between the Nigerian government and the employer, being any Government, organisation or agency.
  • The interest accruing to a person on foreign currency domiciliary accounts.
  • Income earned from outside Nigeria by a temporary guest, lecturer, teacher nurse doctor and other professional and brought into Nigeria provided that such income is deposited in a domiciliary account in an authorised bank in Nigeria.
  • Income from dividend, interest, rent royalties, fees and commission earned from abroad and brought into Nigeria in convertible currency and paid into a domiciliary account in a bank approved by the Government.
  • Income earned from abroad by an author, sportsman, playwright, musician, artist, and brought into Nigeria is exempt from tax provided that such income is brought in foreign currencies and paid into a domiciliary account in an authorised bank in Nigeria.
  • Bonds issued by Federal, State and Local governments and their agencies
  • Bonds issued by corporates including supra-nationals
  • Interest earned by holders of these bonds and short term securities

Any dividend, interest, or royalty accruing from all the ‘other general incomes exempted under PIT’ are not necessarily exempted from WHT.


In the wake of the economic recession, small, medium and large businesses in Nigeria have clamoured for certain fiscal incentives. We believe that the grant of tax waiver by FIRS, in Nigeria at this time, is a big step to alleviate this situation, provide a soft-landing for many defaulting taxpayers and promote voluntary tax compliance. It is also an action that aligns with that of several other tax authorities world over. We therefore urge every affected taxpayer to come forward as quickly as possible, and take maximum advantage of this 45-day tax waiver window currently running in Nigeria.

[1] Taxpayers should please note that penalties & interests subsists in the nation’s tax laws for tax defaulters.

[2] FRBNY Quarterly review 1989.

[3] FRBNY Quarterly review 1989.



[6] Global Journal of Politics and Law Research Vol.3, No.3, pp.105-120, June 2015



[9] Daley, Suzanne (February 20,2011) “Greece Effort to Limit Tax Evasion Have Little Success” also, http//

[10] “EU Commission tells Greece to change tax amnesty” (




[14] When a company in any of the categories (i) to (vi) and (vii) to (xii), is paying out money from such profits, as dividends, interest, rent or royalty to its investors, it is still required to withhold the applicable taxes from such payments as withholding tax is not part of the exemptions in this regard.

[15] Central Bank of Nigeria, or any bank, or other corporate body appointed by the Minister as authorised dealer under the Foreign Exchange (Monitoring and Miscellaneous Provisions) Act or any enactment replacing that Act.

[16] The income tax rate applicable in the relevant Commonwealth country to which the tax relief relates.

[17] Exported service in this case means a service performed by somebody or company residing in Nigeria to a person outside Nigeria. Note the condition of residency for the service supplier, and the condition that the service must be rendered to a person outside Nigeria. Services performed and consumed in Nigeria, on the order of non-resident persons, therefore, do not qualify as exported service.

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