11.04.2024

Nigeria: Nigerian Tax Updates

As times are changing, so is the Nigerian tax landscape. In this article, we highlight some of the recent tax updates in Nigeria in the first quarter of 2024.

1. The Expatriate Employment Levy

In February 2024, the Nigerian Federal Government introduced an Expatriate Employment Handbook (the Handbook) which introduced an Expatriate Employment Levy which mandates all Nigerian entities engaging resident Expatriates, to pay a defined levy for Expatriates who are directors and other categories of expatriates, annually. The Handbook introduces an obligation to maintain a comprehensive record of expatriate employees and promptly provide up-to-date information to government agencies amongst others. Also, it imposes a fine for non-compliance or breach of the provisions of the levy within stipulated timeframes. Significantly, the implementation of the Levy was subsequently suspended to allow for further consultation.

2. The Oil and Gas Companies (Tax Incentives, Exemption, Remission, etc.,) Order 2024

By an Executive Order, the Nigerian President introduced notable tax credits, incentives, and allowances for stakeholders in the Nigerian Oil and Gas sector. Of note, the Order introduced tax credit incentives for non-associated gas greenfield developments. It also makes provisions to grant an investment allowance – of 25% of the actual expenditure incurred – on gas utilization on qualifying expenditure on plant and equipment incurred in respect of projects in the midstream oil and gas industry.

3. Publication of Guidelines for Tax Compliance by Approved Enterprises Operating in Nigeria Export Processing Zone

Furthermore, the Nigerian Export Processing Zone Authority and the Federal Inland Revenue Service issued a joint guideline for tax compliance by approved enterprises operating in Nigeria Export Processing Zones (EPZ) (“The Guidelines”) to provide information and guidance to relevant stakeholders, especially Approved Enterprises operating in the EPZs of their tax obligations in Nigeria. Notably, the Guidelines reiterates that Approved Enterprises are exempt from taxes, levies, and rates for activities carried out in the relevant EPZ. However, where such Approved enterprises provide services to persons who are unapproved enterprise (such as Approved Enterprises whose licences have been invalidated) the Approved enterprise is to include, collect and remit VAT. Also, where an Approved Enterprises makes payment to an unapproved enterprise or to non-resident entities, they are to deduct WHT, where applicable. It also introduces the obligation to file WHT and VAT returns in line with the WHT Regulations and the VAT Act respectively, amongst others.

The question of the legality or otherwise of the provisions of the Guidelines has arisen especially considering the tax exemption that Approved Enterprises in the EPZ enjoy. In the meantime, Approved Entities are to comply pending a nullification or otherwise of the Guidelines by a court of competent jurisdiction.

If you wish to discuss these topics, please contact:

WTS Blackwoodstone

Article published in WTS Africa Quarterly Newsletter #2/2024

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