The Federal Inland Revenue Service (FIRS or "the Service") recently issued the following Information Circulars numbered 2022/01 - 14 ("the Circulars"):

  • Clarification on Filing and Payment of Companies Income Tax ("Tax Filing Circular")
  • Sundry provisions of the Finance Act 2020 relating to Companies Income Tax Act (CIT ACT) ("CIT Circular")
  • Clarification on the Exemption of Small Companies from Income Tax ("Small Companies Taxation Circular")
  • Clarifications on the Provisions of Capital Gains Tax (CGT) Act ("CGT Circular")
  • Clarification on the Tax Implications of the Operation of Regulated Securities Lending Transaction ('SEC Lending') In Nigeria ("SEC Circular")
  • Guidelines on the Tax Treatment of Non-Governmental Organisations (NGOs) ("NGO Circular")
  • Clarification on Section 16 of Companies Income Tax Act in relation to Taxation of Insurance Companies ("Insurance Taxation Circular")
  • Clarification on the Implementation of the Value Added Tax (VAT) Act ("VAT Circular")
  • Information Circular for the Administration of the National Agency for Science and Engineering Infrastructure Levy ("NASENI Circular")
  • Information Circular for the Administration of Nigeria Police Trust Fund Levy ("NPTF Circular")
  • Information Circular for the Administration of the Tertiary Education Tax ("TET Circular")
  • Taxation of non-residents in Nigeria ("NRC Circular")
  • Provisions of the Finance Act, 2021 relating to Personal Income tax ("PITA Circular")
  • Information Circular on the Claim of Tax Treaties Benefits and Commonwealth Tax Relief in Nigeria ("Tax Treaties Circular") The FIRS also issued the following Public Notices in relation to amendments introduced by Finance Act, 2021:
  • Public Notice on the Mandate of the FIRS as the primary agency of the Federal Government for Tax Administration
  • Public Notice on Deployment of Automation of Tax Administration Solution
  • Public Notice on Charge of CGT on Proceeds from Disposal of Shares Pursuant to the Amendment of Section 30 of the CGT Act

The Circulars and Public Notices are aimed at providing guidance to stakeholders on the interpretation of the amendments to the extant tax laws by Finance Act, 2021 ("the Act"), assist taxpayers to understand their obligations under the various tax laws amended by the Act and improve their compliance with the laws.

However, there are matters arising from the clarifications and guidance provided in the Circulars that may have unintended consequences. This publication contains analysis of those issues and highlights the key areas requiring further consideration and clarifications from the FIRS.

Chapter One

Clarification on filing and payment of Companies Income Tax

The Federal Inland Revenue Service (FIRS) Information Circular No. 2022/01 ("the Circular" or "the FIRS Circular") provides guidelines on relevant provisions of the Companies Income Tax (CIT) Act relating to taxation of companies and payment of additional liabilities arising from an assessment.

The key issues from the Circular are discussed below:

1.1. Scope of Profits of a Nigerian Company that is subject to income tax in Nigeria

Based on the provisions of Sections 9 and 13(1) of CIT Act, Nigerian companies (i.e., companies incorporated in Nigeria) are subject to income tax in Nigeria on their worldwide income whether or not such income accrued in, or was derived from, brought into, or received in Nigeria. The Circular correctly highlights this point and illustrates how this interpretation would apply to passive incomes, such as rent, dividends, and interests, that are earned outside Nigeria and retained in foreign bank accounts outside Nigeria.

However, the Circular did not make any reference to the exemption in Section 23(k) of CIT Act in respect of passive incomes that are brought into Nigeria through government-approved channels. Thus, taxpayers that are not familiar with the exemption may erroneously conclude that such passive incomes would always be taxable in Nigeria.

Accordingly, it is important to clarify that Section 23(k) of CIT Act specifically exempts dividend, interest, rent, or royalty derived by a company from a country outside Nigeria, from Nigerian CIT where such passive incomes are brought into Nigeria through "Government approved channels".

CIT Act defines "Government approved channels" as "the Central Bank of Nigeria and any bank or corporate body appointed by the Minister as authorised dealer under the Foreign Exchange (Monitoring and Miscellaneous Provisions) Act or any enactment replacing that Act.>"

Therefore, even though the provisions of Sections 9 and 13(1) of CIT Act apply to the worldwide income of Nigerian companies, some of the income streams may not suffer income tax in Nigeria where they meet the conditions for income tax exemption.

1.2 Timeline for payment of income tax liabilities

Section 3.0 of the Circular highlights the fact that Section 77 of CIT Act permits companies to pay the income tax due in respect of a self- assessment in one lump sum or in instalments, provided the final instalment is paid by the due date of filing.

The FIRS Circular also states that payment of any tax due on account of an additional assessment, revised assessment, or any other instance where a notice of assessment is served on a company, must be made within 30 days of service of such notice. Therefore, taxpayers opting for instalment payment of a self-assessed or FIRS-assessed tax liability must ensure that the final instalment is paid by the 30th day of service of the notice. However, where such taxpayers wish to apply for an extension of the payment timeline, they must submit the application before the expiration of the initial due date, and state the proposed instalment payment plan with evidence of payment of at least the first instalment. In this instance, penalty and interest charges will start to ac - crue after the initial due date of payment even where the instalment payment plan is approved by the FIRS.

It is important to clarify that the FIRS' comments in Section 3.0 of the FIRS Circular on the timeline for the payment of taxes due in respect of an additional assessment, should be read together with the FIRS' clarification in Section 3.1.1 of the Circular on collec - tion of tax in case of an objection or appeal. This is because the statutory 30-day period for the payment of assessed tax liabilities only applies to assess - ments that are not being contested by a taxpayer or that have otherwise become final and conclusive.

However, Section 77(2) of CIT Act specifically pro - vides that the collection of tax in any case where notice of an objection or appeal has been given by a taxpayer shall remain in abeyance until such objection or appeal is determined. Therefore, taxpayers are not under any obligation to settle a FIRS assessment notice for additional tax liability in respect of which a valid notice of objection or appeal has been filed.

Notwithstanding, it is imperative that companies set - tle the undisputed portion of any assessment notice that is being contested within 30 days of service of the notice of assessment, and include the evidence of payment of that undisputed tax liability in their notice of objection or appeal.


We commend the FIRS for providing clarification on the requirements for payment and filing of CIT returns as provided in the Act. The timelines for filing and payment of CIT should be noted and respected by taxpayers to avoid payment of penalties and interest for late filing and payment.

Please click here to read and download the Circular.

Chapter Two

Clarification on sundry provisions of Finance Act relating to Companies Income Tax Act

The FIRS' Information Circular No. 2022/02 ("the Circular" or "the FIRS Circular") replaces Information Circular No. 2021/11 of June 2021 and provides updated guidance on the implementation of sundry provisions of Finance Act, 2021 as it relates to CIT Act.

We have highlighted the key updates to the Circular below:

2.1. Exclusion of educational institutions from companies exempted from income tax

Section 23(1)(c) of CIT Act previously exempted from income tax, the profits of "any company engaged in ecclesiastical, charitable or educational activities of a public character in so far as such profits are not derived from a trade or business carried on by such company"

Section 7(a) of Finance Act, 2021 amended the above provision by deleting the reference to companies engaged in "educational activities" as a specific category of organizations whose profits are exempted from income tax. Essentially, based on the amendment, profits derived by educational institutions and other similar organizations from educational activities will no longer qualify for income tax exemption unless such profits are exempted by another provision of CIT Act.

In this regard, Section 5.0 of the FIRS Circular has clarified that companies that engage in educational activities that are deemed to be "charitable in nature" may benefit from the income tax exemption applicable to "charitable activities" under Section 23(1)(c) of CIT Act where such companies are able to demonstrate that their activities are charitable in nature. Based on the Circular, all the following conditions must be met for an educational activity to qualify as being "charitable in nature":

  1. The company solves educational needs on grounds of kindness and benevolence,
  2. The company does not charge fees for its services, and
  3. Any surplus/profit derived by the company is ploughed back into its educational activities.

Consequently, educational institutions that are profit-oriented (i.e., that are capable of distributing profits to their shareholders) will no longer benefit from the tax exemption provided under Section 23(1)(c) of CIT Act. Please refer to Chapter Six of this publication for further comments on this amendment in relation to the FIRS' Guidelines on the Tax Treatment of Non-Governmental Organisations.

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The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.