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The Nigerian Tax Incentives and Relief Policy

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Book cover Nigerian Taxation

Objectives

The main objective of study in this chapter is a discussion on tax incentives and reliefs available to both corporate and personal taxpayers under the Nigerian Tax Laws. Tax incentives and reliefs are an aspect of policy administration targeted at the reduction of taxpayers’ burden as well as paraphernalia of attracting foreign investment into the country . At the completion of the study in this chapter, readers are expected to

  1. i.

    know what tax incentives are;

  2. ii.

    appreciate the Legal Regimes of Tax Incentives and Relief in Nigeria ;

  3. iii.

    be abreast with different Categories of Tax Incentives and Reliefs in Nigeria ;

  4. iv.

    know what Tax Amnesty is, and

  5. v.

    be aware of various objectives of Tax Incentives and Reliefs in the Contemporary Nigerian Tax Environment.

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Notes

  1. 1.

    Ayua I.A. op. cit., (n. 8), pp. 306–308.

  2. 2.

    Ayua I. A “Tax Incentives and Private Industrial Investment in Nigeria ” Nigerian Commercial Law, Problems and Perspectives 1993 Vol. 2 Nigerian Commercial Law and Business Law Journal p. 85, as cited in D.C John, “An examination of the statutory provisions on tax incentive in Nigerian Oyesola Animasaun”, O.Y. Abdul and Bimbo Atilola (E.d.) Changing perspective in the Law and Practice of Taxation in Nigeria : Essays in honour of Prof. M.T. Abdulrazaq (Hybrid Consult and College of Law Kwara State University, 2017), p. 402.

  3. 3.

    Hornby, op. cit., (n. 243), p. 753.

  4. 4.

    Bryan A.G . op. cit., (n. 221), p. 1474.

  5. 5.

    DC John op. cit., (n. 477), 412.

  6. 6.

    Ibid.

  7. 7.

    Soyode, L. & Kajola, S. O., op. cit., (n. 48), p. 59.

  8. 8.

    Ayua, op. cit., (n. 8), p. 316.

  9. 9.

    Cap 18 Laws of the Federation of Nigeria 2004.

  10. 10.

    Olumide K.O, Olukayode O.A and M.S. Oke Omene “A Critical Assessment of the Pioneer Status Incentive (Tax Holiday ) Regime in Nigeria ” in J.A.M Agbonika, J.A.A.A Agbonika and Olokooba S.M (Eds.) Topical Issues on Nigerian Tax Laws and Related Areas (College of Law, Salem University Lokoja, Nigeria , 2018), pp. 288–289

  11. 11.

    Orojo, J.O. op. cit., (n. 112), p. 160.

  12. 12.

    Ariwodola J.A.A op. cit., (n. 288), p. 74.

  13. 13.

    It is important to state here that in Nigeria , wife allowance has been abolished with effect from 1992 but alimony allowance still subsist.

  14. 14.

    Ayua, op. cit., (n. 8), p. 317.

  15. 15.

    Sections 38 (1–5) & 39 (1–10), PITA , Cap. P8 LFN , 2004.

  16. 16.

    See Section 45 CITA, LFN , Cap. C21, 2004 (as amended), 2007.

  17. 17.

    Now Section 41(1)–(4) CGTA, Cap. C1, LFN , 2004, see also, Lekan, S. & Sunday, O. op. cit., (n. 48), p. 449.

  18. 18.

    Section 61(1)–(5) & Section 62(1)–(10) Cap. P13, LFN , 2004.

  19. 19.

    See the subsidiary legislations in the Companies Income Tax Act, Cap., C21, L.F.N, 2004.

  20. 20.

    Lekan, S. & Sunday, O. op. cit., (n. 48), p. 143.

  21. 21.

    Ola, C.S. op. cit., (n. 6), p. 174.

  22. 22.

    Collins English Dictionary , (Collins Publishers, 2000).

  23. 23.

    Ola, C.S. op. cit., (n. 6), p. 286.

  24. 24.

    Ibid.

  25. 25.

    Orojo, op. cit., (n. 112), p. 137.

  26. 26.

    Ibid.

  27. 27.

    CAP C21 Laws of the Federation of Nigeria , (2004).

  28. 28.

    James A.A, op. cit., (n. 288), p. 79.

  29. 29.

    Ibid., p. 17.

  30. 30.

    See Section 10 petroleum profit tax act . Cap p. 13 2004.

  31. 31.

    See Section 13 CITA, 2004.

  32. 32.

    See Section 23 (1) CITA. Similar provisions are in Section 26 (a)(b)(c)(d) Capital Gains Tax Act , Cap.C1, LFN , 2004.

  33. 33.

    As stated in James, op. cit., (n. 288), pp. 244–251.

  34. 34.

    Section 23 (g) Companies Income Tax Act, Cap. C21 LFN , 2004(as amended), 2007. Also, in Section 27(1) CGTA, Cap. C1, LFN , 2004.

  35. 35.

    Section 23 (h) Companies Income Tax Act, Cap. C21 LFN , 2004 (as amended), 2007. Also in Section 27(2)(a), CGTA, Cap. C1, LFN , 2004.

  36. 36.

    Section 23 (i) Companies Income Tax Act, Cap. C21 LFN , 2004 (as amended), 2007. Also in Section 27(2)(b), CGTA, Cap. C1, LFN , 2004.

  37. 37.

    Section 20 (g) Personal Income Tax Act, 2004. Also in Section 28(1)(a), CGTA, Cap. C1, LFN , 2004.

  38. 38.

    James, op. cit.,, (n. 288), p. 246. Also in see the corresponding provision in Section 30 CGTA, Cap. C1, LFN , 2004.

  39. 39.

    Ibid.

  40. 40.

    For details, see, ibid., pp. 244–246.

  41. 41.

    Section 36, 37 and 40 Capital Gains Tax Act , Cap. C1, LFN , 2004 contains other exemptions and relief provisions.

  42. 42.

    Ayua, I.A. op. cit., (n. 8), p. 312.

  43. 43.

    Ibid.

  44. 44.

    Abdulrazaq, M.T. “Capital Tax Allowance” in Abdulrazaq, M.T. (Ed.) ( Nigerian Tax Notes , Vol. 5 No. 7, July 1999), p. 1.

  45. 45.

    Lekan, S. & Sunday, O. op. cit., (n. 48), p. 144.

  46. 46.

    Abdulrazaq M.T. op. cit., (n. 519), p. 1.

  47. 47.

    For detail see, Lekan, S. & Sunday, O. op. cit., (n. 48), p. 143. See also Ola, C.S. op. cit., (n. 6), pp. 183–184. Orojo, op. cit., (n. 112), pp. 143–146. See also, Paragraph 6, Schedule 2 GTA for annual allowances, Paragraph 7 Schedule 2, CITA for writing down allowances and Paragraph 9 of Schedule 2, CITA for balancing allowance.

  48. 48.

    Orojo, op. cit., (n. 112), p. 143.

  49. 49.

    Ola C.S. op. cit., (n. 6), p. 288.

  50. 50.

    Ibid.

  51. 51.

    Ibid., p. 184.

  52. 52.

    Orojo, op. cit., (n. 112), p. 144.

  53. 53.

    Ibid.

  54. 54.

    James, op. cit., (n. 288), p. 101.

  55. 55.

    Lekan, S. & Sunday, O. op. cit., (n. 48), p. 144. See also James A.A, op. cit., (n. 288), p. 89.

  56. 56.

    Ibid.

  57. 57.

    For various instances when asset is said to be disposed of see Orojo, op. cit., (n. 112), pp. 145–146.

  58. 58.

    Ola C.S. op. cit., (n. 6), p. 185.

  59. 59.

    James, op. cit., (n. 288), p. 89.

  60. 60.

    See Sub-paragraph 22 of Paragraph 1 CITA, 2004.

  61. 61.

    Schedule 2, Paragraph 22, CITA.

  62. 62.

    Stocks v Costain Property Investments Ltd. (1984) STC, 204.

  63. 63.

    Bakwaph-Kanyip, B. “Companies Income Tax “ in Abdulrazaq, M.T. (Ed.) CITN Nigerian Tax Guide and Statute, (1st Edition, The Chartered Institute of Taxation of Nigeria , 2002), p. 184.

  64. 64.

    Section 29 (2) CITA, 2004.

  65. 65.

    James, op. cit., (n. 288), pp. 67–68.

  66. 66.

    Ibid., p. 68, however, losses incurred by any company that is engaging in agricultural trade or business can be carried forward with no time limit.

  67. 67.

    Ibid.

  68. 68.

    Abdulrazaq, M.T. “Tax Implications of Provision for Bad Debts by Nigerian Banks ” p. 56.

  69. 69.

    (1925) 9 T.e 319.

  70. 70.

    James, op. cit., (n. 288), p. 98.

  71. 71.

    For detail analysis of all these reliefs, see, Ariwodola J.A.A Companies Taxation in Nigeria , including Petroleum Profits Tax (3th edition, J.A.A Nigeria Limited 2000), pp. 15–20.

  72. 72.

    VAT input is the VAT paid on VATable goods and services purchased. Input tax allowable according to the 1998 Amendment to the Decree) is only allowed if it is tax on goods purchased or imported directly for resale and goods which form the stock-in-trade used for the direct production any new product in which the output tax is charged. It is important to note however that any input tax on overhead, that is services and general administration of business which ordinarily can be expended through the income statement and on capital item and asset shall not qualify as input tax as stated in Section 17(2)(b) Value Added Tax Act, Cap. VI, LFN , 2004.

  73. 73.

    VAT output is a VAT charged on VATable goods and services sold. It is important to note that if the input tax exceeds the output tax , the tax payer will be entitled to a refund of the excess tax from the Board on production of such documents as the Board may from time to time required, as outline in Section 16(b) Value Added Tax Act, Cap. VI, LFN , 2004.

  74. 74.

    FIRS Information Circular No 9503 on VAT operation in Banks and other Financial Institutions, of 1st December,1995. See also, Ibid. 75.

  75. 75.

    FIRS Information Circular No. 9501 of 13th January, 1995.

  76. 76.

    D.C John, op. cit., (n. 477), p. 412.

  77. 77.

    Ibid., p. 413.

  78. 78.

    Ayua, op. cit., (n. 8), pp. 225–256, see also ibid., 414–415.

  79. 79.

    Ibid.

  80. 80.

    See Federal Government Targets More Revenue from VAIDS available online at http://sunnewsonline.com/fg-targets-more-revenue-from-vaids-in-2018/ accessed on 15th October, 2018.

Relevant Authorities and References for Further Reading

Cases

Books

  • Abdulrazaq, M.T.: Capital tax allowance. In: Abdulrazaq, M.T. (ed.) Nigerian Tax Notes, Vol. 5 No. 7, July 1999

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  • Ariwodola, J.A.A.: Companies Taxation in Nigeria, including Petroleum Profits Tax, 3 edn. J.A.A Nigeria Limited (2000)

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  • Ariwodola, J.A.A.: Personal Taxation in Nigeria, including Capital Gains Tax. 4 edn. J.A.A Nigeria Limited (2001)

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  • Ayua, I.A.: Nigerian Tax Law. Spectrum Books Ltd, Ibadan (1999)

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  • Bakwaph-Kanyip, B.: Companies income tax. In: Abdulrazaq, M.T. (ed.) CITN Nigerian Tax Guide and Statute, 1 edn. The Chartered Institute of Taxation of Nigeria (2002)

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  • Bryan, A.G.: Black’s Law Dictionary, 7th edn, p. 1474. St. Paul Minn West Publishing Co, USA (1990)

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  • Collins English Dictionary. Collins Publishers (2000)

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  • Hornby, A.S.: Oxford Advanced Learner Dictionary International Student edition, 7 edn. Oxford University Press, New York (1997)

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  • John, D.C.: An examination of the statutory provisions on tax incentive. In: Animasaun, N.O., Abdul, O.Y., Atilola, B. (eds.) Changing Perspective in the Law and Practice of Taxation in Nigeria: Essays in honour of Prof. M.T. Abdulrazaq, p. 402. Hybrid Consult and College of Law Kwara State University (2017)

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  • James, A.A.: Personal Taxation in Nigeria, 4th edn. J.A.A Nigeria Ltd, Lagos (2001)

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  • Lekan, S., Sunday, O.: Taxation: Principles and Practice in Nigeria. Silicon Publishing Company, Ibadan (2006)

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  • Ola, C.S.: Income Tax Law for Corporate and Unincorporated Bodies in Nigeria. Heinemann Educational Books (Nigeria) Ltd, Ibadan (1984)

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  • Olumide, K.O., Olukayode, O.A., Oke Omene, M.S.: A critical assessment of the pioneer status incentive (Tax Holiday) regime in Nigeria. In: Agbonika, J.A.M., Agbonika, J.A.A.A., Olokooba, S.M. (eds.) Topical Issues on Nigerian Tax Laws and Related Areas. College of Law, Salem University Lokoja, Nigeria (2018)

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  • Orojo, J.O.: Company Tax Law in Nigeria. Sweet and Maxwell, London (1979)

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  • Soyode, L., Kajola, S.O.: Taxation Principles and Practice in Nigeria. Silicon Publishers, Ibadan (1998)

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Journals

  • Abdulrazaq, M.T.: Tax implications of provision for bad debts by nigerian banks’ author’s private collection

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  • Ayua, I.A.: “Tax incentives and private industrial investment in Nigeria” Nigerian Commercial Law, Problems and Perspectives 1993 Vol. 2 Nigerian Commercial Law and Business Law Journal

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Workshop

  • Ipaye, A.: Tax collection and government responsibility under an international economic recession. Being a paper presented at the 1st Akwa-Ibom State Revenue summit, April 6–7 2009

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Authors and Affiliations

  1. Department of Business Law, Faculty of Law, University of Ilorin, Ilorin, Nigeria

    Saka Muhammed Olokooba

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Olokooba, S.M. (2019). The Nigerian Tax Incentives and Relief Policy. In: Nigerian Taxation. Springer, Singapore. https://doi.org/10.1007/978-981-13-2607-3_14

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