Introduction
The National Agency for Science and Engineering Infrastructure Act ("the Act") was enacted in 1992. Under the Act, The National Agency for Science and Engineering Infrastructure ("NASENI") was established. The functions of NASENI includes practical implementation of the national science and technology policy, commissioning technical feasibility studies for the establishment of science and engineering infrastructure development complexes, establishment and maintenance of engineering infrastructure development complexes, enhancing science and agriculture related research, development of local capacity amongst others.
The Act introduced The National Agency for Science and Engineering Infrastructure Levy ("the Levy") to serve as a source of funds for NASENI. However, provisions of the Act relating to payment of the Levy has not been implemented since 1992 due to lack of clear guidelines on the procedure for collection and administration of the levy. To bridge this gap, the Finance Act, 2021 ("the Finance Act") introduced certain amendments to the provisions of section 20(2)(b) of the Act by imposing a 0.25% levy on the profit before tax of commercial companies and firms, operating in certain sectors, with turnover of NGN100,000,000 and above. The Finance Act also provides that the Levy will be collected by the Federal Inland Revenue Service (FIRS). The Levy collected by the FIRS pursuant to the Act will be transferred to the account of NASENI.
Further to the above, the FIRS published an Information Circular on the administration of the National Agency for Science and Engineering Infrastructure Levy (NO: 2022/23) ("the Circular") on 1 September 2022.
Affected Businesses
The companies or firms specifically required to pay the levy are those operating in the mobile telecommunication, ICT, maritime, banking, aviation and oil and gas sectors. According to the Circular, both resident and non-resident companies, operating in these sectors, that meets the NGN100,000,000 turnover threshold and are subject to tax in Nigeria are required to pay the levy. In the Circular, affected sectors were specifically described as follows:
- Banking Sector: These are companies engaged in
banking activities as defined under the Banks and other Financial
Institutions Act (BOFIA) 2020;
- Mobile Telecommunications Sector: These are
companies engaged in the business of mobile telecommunications as
licensed by the Nigerian Communications Commission and other
regulators of the industry;
- ICT Sector: These are companies engaged in the
business of information communications technology as licensed by
the National Information Technology Development Agency and other
Regulators in the industry;
- Aviation Sector: These are companies engaged
in the business activities that are regulated by the Nigerian Civil
Aviation Authority and Nigerian Airspace Management Agency;
- Maritime Sector: These are companies engaged
in business activities that are regulated by the Nigerian Maritime
Administration and Safety Agency;
- Oil and Gas Sector: These are companies engaged in upstream, midstream and downstream oil and gas business as defined under the Petroleum Industry Act (PIA), 2021.
Other Relevant Provisions
The Circular also prescribes the following administrative measures:
- The Levy will be chargeable on the profit before tax of 2021
financial statements of the companies and firms liable to the levy
for the 2022 year of assessment as the effective date for the
implementation of the amendments introduced under the Finance Act
is 1 January 2022;
- NASENI levy returns are to be filed together with the income
tax returns, in accordance with the provisions of the Companies
Income Tax Act (CITA) relating to time of filing (i.e. six months
after the financial year end of the company)
- Payment of the Levy based on self assessment is to be made on
or before the due date of filing. Payment may be made in
instalments provided that the final instalment is paid on or before
the due date of filing. With respect to additional assessment,
revised assessment or notice of assessment issued by the FIRS,
payment is to be made within 30 days of service of the
notice;
- The NASENI levy is not tax deductible in determining the
assessable profits under the CITA;
- Failure to comply with the compliance requirement obligations under the NASENI Act will attract appropriate penalties in line with the provision of the extant laws.
Our Comments
The Circular provides clarity on the procedure for administration and collection of the Levy. However, an aspect of the Circular seems to be at variance with express provisions of Section 22 of the Act. The Circular states that the Levy is not tax deductible in determining the assessable profits under the CITA. On the other hand, Section 22 of the Act clearly states that "All income derived by the Agency from the sources specified in section 20 (2) of this Act shall be exempt from income tax and all contributions to the fund of the Agency shall be tax deductible" (emphasis ours).
Based on this seeming contradiction, the position of the FIRS on tax deductibility of NASENI levy can, therefore, be challenged in court in other to obtain appropriate judicial interpretation of Section 22 of the NASENI Act.
It is instructive to note that the court and Tax Appeal Tribunal has held that an information circular issued by the FIRS is a mere expression of the opinion of the author and does not have any force of law. Therefore, any aspect of an information circular that contradicts express provisions of the law is void. See Tetra Pak v. FIRS (TAT/LZ/WHT/007/2019) and Halliburton v FIRS [2016] 4 NWLR (Part 1501) 53.
It is important for affected taxpayers to obtain appropriate legal and tax advice to fully understand the practical implications of the Act and attendant compliance requirements.
The Circular can be accessed via the link below:
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.
