Globally, the tax ecosystem is shaped by Court/Tax Tribunal decisions and executive directions. Nigeria is not an exemption. In the last few weeks of 2023, the Nigerian tax system saw various noteworthy highlights, which provide pointers for the direction of the Nigerian Tax System in 2024. This article highlights some of these points.
JB Daudu SAN v. Hon. Minister for Finance, Budget, and National Planning & Anor.
The perennial question surrounding the constitutionality or otherwise of the provisions of the Rules and Practice Directions which prescribe the payment of half or 100% of disputed assessments prior to the hearing of an appeal was laid to rest in this case. The Federal High Court (FHC) ruled that the provision was unconstitutional, null, and void on the basis, amongst others, that it impaired the constitutionally guaranteed rights to fair hearing and appeal. Prior to this decision, various provisions of the FIRS (Procedure) Rules 2021, the FHC (FIRS) Practice Direction 2021 and the FHC (Tax Appeals) Rules 2022, were cumulatively to the effect that an Applicant challenging a tax assessment was mandated to deposit half or 100% of the assessed amount into an interest yielding federal account pending the hearing and resolution of the appeal.
MTN Communications v. FIRS
In this case, the Tax Appeal Tribunal (TAT) ruled that the provision of software licensing and upgrades qualified as VAT-able supply in Nigeria. The TAT founded its decision on the fact that the software licensed by MTN was meant for value addition to the assets of MTN. The TAT also found that the FIRS is empowered to initiate a tax investigation on any violation of tax laws and such violation need not be fraudulent. Also, it held that training provided by offshore facilitators is subject to VAT if enjoyed in Nigeria.
Exemption of Imports of Liquefied Petroleum Gas (LPG) from Import Duty and Value Added Tax
At the end of 2023, the Federal Government reiterated the exemption from payment of import duties and VAT on the importation of LPG, LPG machinery, and equipment such as LPG dispensers, gas generators, LPG trucks, etc. The directive is aimed at increasing the supply of LPG to meet local demands and promote clean cooking practices.
2024 Outlook
In 2023, a Presidential Committee on Fiscal Policy and Tax Reforms was inaugurated to advise on the removal of hurdles to Nigerian economic growth. In forming our tax outlook for 2024, the pronouncements of the Committee’ Chairman are significant pointers to the possible occurrences in the Nigerian Tax Environment. Amongst others, the Chairman noted that the payment of taxes in foreign currencies would be discontinued for some companies as there was no justification for companies conducting business in Naira to settle their taxes in foreign currency. The Chairman also noted that the Committee was reviewing and redrafting Nigeria’s current tax legislation to achieve a simpler and less complex tax system as well as suspending various state taxes that impede business operations for corporate taxpayers.
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