Introduction
2024 has been a pivotal period for the Nigerian tax landscape, marked by significant legislative changes, and landmark court decisions. Three broad trends emerged from these developments. First, the government took steps to address escalating inflation and the rising cost of living through fiscal instruments. Second, there was a comprehensive effort to overhaul the tax laws. Third, there were fiscal initiatives focused on enhancing investments in the oil and gas sector to boost output.
These developments have not only reshaped the tax environment but also set the stage for future reforms aimed at enhancing compliance, broadening the tax base, and fostering economic growth. This review highlights the key legislations, court decisions and rulings from tax tribunals in Nigeria during 2024.
The Review
ADMINISTRATION OF TAXES
1. Implementation of the Collection and Remittance of National Cyber Security Levy
Following the enactment of the Cybercrime (Prohibition, Prevention etc.) (Amendment) Act, 2024 ("Cybercrime Act"), the Central Bank of Nigeria (the "CBN") issued a Circular dated May 6, 2024, on the implementation guidelines for the collection and remittance of the National Cybersecurity Levy (the "Levy"). The Cybercrime Act imposes a levy of 0.5% on all electronic transactions, which shall be applied at the point of electronic transfer origination, deducted and remitted by the financial institution.1 The Levy is to be deducted and remitted by banks, financial institutions and payment service providers under the regulatory purview of the CBN. However, due to widespread concerns raised by stakeholders, the government suspended the implementation of the Cybersecurity Levy in a subsequent circular dated May 17, 2024.2 Please see our publication of August 12, 2024, for further details about the levy3.
2. Migration to TaxPro Max Platform for the filing of Transfer Pricing Returns and CountryBy-Country Reporting Notifications
On February 18, 2024, the Federal Inland Revenue Service ("FIRS") issued a public notice stating that the annual filing of the Transfer Pricing Returns (TP Returns) and Country-byCountry Reporting (CBCR) notifications have been migrated from the electronic TP platform (e-TP Plat) to the TaxPro-Max platform. The Public Notice further granted existing and potential taxpayers a waiver of all administrative penalties that accrued prior to June 30, 2024 provided all outstanding TP returns and CBCR notifications of such taxpayers are filed on TaxPro-Max by June 30, 2024. Going forward, taxpayers are obligated to utilize the TaxPro-Max platform for the filing of TP returns and CBCR notifications using their regular login details.
3. Taxpayer Self-Registration Module on TaxPro-Max
On March 11, 2024, FIRS introduced the TaxPro-Max which allows taxpayers to complete all tax registration processes with the FIRS independently and remotely from anywhere in the world. In 2024, the FIRS updated the platform by introducing a self-registration module. The process saves time and resources. With this innovation, newly registered corporate business entities are automatically assigned a Tax Identification Number (TIN) at the point of registration with the CAC and can now finalize their registration with the FIRS on TaxPro-Max by following the on-screen prompts.
4. 2024 Tax Reform Bills
Following the launch of the Presidential Committee on Fiscal Policy and Tax Reforms (the "Committee"), chaired by Mr. Taiwo Oyedele, significant steps have been taken to transform Nigeria's tax system. The Committee submitted a set of policy recommendations to the Federal Executive Council (FEC). After reviewing and adopting these proposals, the FEC advanced four executive tax reform bills to the National Assembly. These bills are:
4.1 Nigeria Tax Bill, 2024:
This bill seeks to cancel all existing tax laws and establish comprehensive fiscal framework for taxing Nigerian residents. If approved, it would consolidate all tax responsibilities and expectations into a single document, eliminating variations across different types of taxes.
4.2 Nigeria Tax Administration Bill, 2024:
This bill is designed to create a clear legal structure for all aspects of tax administration. It covers procedures for taxpayer registration, filing returns, assessments, payments, and the use of modern technology in tax processes. Additionally, it outlines the roles and authority of tax officials, sets rules for determining tax residency for both individuals and businesses, and details offenses along with their penalties.
4.3 Nigeria Revenue Service (Establishment) Bill, 2024:
This bill intends to modernize the nation's tax administration, this bill proposes to repeal the 2007 Federal Inland Revenue Service Act and replace it with the establishment of the Nigeria Revenue Service. The new bill introduces updated regulations, incorporates new measures, and removes outdated provisions to enhance oversight, enforce compliance, and improve the efficiency of revenue collection and accounting.
4.4 Joint Revenue Board (Establishment) Bill, 2024:
This bill proposes replacing the current Joint Tax Board with a new Joint Revenue Board. In addition, it calls for the creation of a Tax Appeal Tribunal and a Tax Ombuds Office. The bill's objectives include improving the management of taxpayer data, ensuring consistent tax practices throughout Nigeria, and providing expert advice on tax policy through detailed research and analysis of revenue trends.
5. Economic Stabilization Bill, 2024
The Federal Executive Council has approved the Economic Stabilisation Bill, 2024. This new legislation is designed to drive economic growth and stability by implementing a comprehensive tax and fiscal reforms in key sectors of the economy. Its primary objectives are to reduce inflation, alleviate poverty, and maintain stable exchange rates, all aimed at fostering economic recovery and national prosperity.
The bill introduces several significant changes to current laws, including: (a) revamping the foreign exchange framework to improve access to foreign currency and strengthen the local currency, (b) tax relief to companies that maintain their workforce for at least three years, (c) tax reliefs for private sector employers including transport subsidies provided to their employees, and (d) tax identification consolidation and collaboration to broaden the tax base and ensure fair treatment for all businesses.
OIL AND GAS
6. Tax Credits for Non-Associated Gas Greenfield Development and Midstream Capital and Gas Utilization Investment Allowance
On February 28, 2024, President Bola Ahmed Tinubu (the "President") issued the Oil and Gas Companies (Tax Incentives, Exemption, Remission, etc.) Order, 2024 (the "Order"). The Order provides certain fiscal incentives aimed at supporting companies within the Nigerian oil and gas industry. Further to that, the Order granted specific tax credit incentives to non-associated gas ("NAG") greenfield developments in onshore and shallow water locations, with first gas production on or before January 1, 2029.4 It also provides for a gas tax credit at the rate of $1.00 per thousand cubic feet or 30% of the fiscal gas price (whichever is lower) if hydrocarbon liquids (HCL) content does not exceed 30 barrels per million standard cubic feet (SCF). If HCL exceeds 30 barrels per million SCF but does not exceed 100 barrels per million SCF, a gas tax credit at the rate of $0.50 per thousand cubic feet or 30% of the fiscal gas price is applicable5.
For other greenfield NAG projects with the first commercial production after January 1, 2029, the Order grants a gas tax allowance at a rate of $0.50 per thousand SCF or 30% of the fiscal gas price (whichever is lower). The gas tax credit shall apply for a maximum duration of ten years, after which it shall transition into a gas tax allowance.
Another tax incentive introduced by the Order is the midstream capital and gas utilization investment allowance ("the Investment Allowance"). This incentive is granted to gas companies on qualifying expenditure on plants and equipment incurred by the company in respect of any new and ongoing project in the midstream oil and gas industry, subsisting on the effective date of the Order, being February 28, 2024. The rate of the Investment Allowance is 25% of the actual expenditure incurred on qualifying plants and equipment.6 The Order further empowered the Minister for Finance to introduce other incentives to ensure that investments in deep water oil and gas projects achieve a competitive internal rate of return.7
7. Petroleum Tax Incentives on Deep Offshore Oil and Gas Production
In exercise of the powers conferred under para. 10 of the Order and s. 2 of the Ministers' Statutory Powers and Duties (Miscellaneous Provisions) Act, 2004, the Minister of Finance on February 28, 2024, issued the Notice of Tax incentives on Deep Offshore Oil & Gas Production, 2024 (the "Notice").
The Notice introduces production tax credit incentives applicable to two distinct categories of deep offshore developments within Oil Mining Leases (OMLs) and Petroleum Mining Leases (PMLs) regimes on production sharing contracts (PSC) or profitsharing contracts. The categories are (a) existing leases with an approved field development plan where the lessee makes a Final Investment Decision (FID) between February 28, 2024, and January 1, 2029; and (b) future leases awarded after February 28, 2024, including those emanating from existing and future oil prospecting licenses or petroleum prospecting licences.8 The Notice stipulates that any company desirous of taking benefit of the incentives must notify the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) within thirty (30) days of their final investment decision to qualify for these incentives.
Additionally, the incentives extend to non-associated gas developments, with specific tax credit rates depending on the hydrocarbon liquids content.9 This inclusion is particularly significant as it encourages the development of gas resources, which are crucial for Nigeria's energy diversification and economic growth.
EXCISE DUTY
8. Implementation of the Customs, Excise Tariff, Etc. Variation Order 2024
In a move to address food price inflation and promote domestic agricultural growth, the Federal Government announced the introduction of the Regulation for the Implementation of the Customs, Excise Tariff, Etc. Variation Order 2024. The Regulation outlines the framework for implementing the 2024 Customs and Excise Tariff Order. The objective is to reduce food price inflation in the country by introducing waivers to levies, duties, value-added taxes, and tariffs on essential food imports.
9. Zero tariffs and excise duties on specific pharmaceutical machinery, equipment, goods and accessories
On June 28, 2024, President Bola Tinubu signed an Executive Order entitled "the Presidential Executive Order to Increase Local Production of Healthcare Products, Reduce Costs of Healthcare Equipment and Consumables, and Promote Local Investments, 2024". The Executive Order seeks to remove excise duty/tariffs, and value-added tax on specified (A) active pharmaceutical ingredients (API) and other life science raw materials for essential medicines, including antibiotics, anti-diabetic, anti-hypertensive and oncology drugs, and (B) raw materials and machinery for manufacturing of insecticidal nets, rapid diagnostic kits and reagents. The objective of the Executive Order is to significantly reduce operational costs and encourage local production of essential pharmaceuticals and medical products.
The Executive Order requires the Ministers of (A) Health, (B) Finance and (C) Industry, Trade and Investment to collaborate for the development of a harmonized implementation framework to guide relevant agencies in the operationalization and implementation of the Executive Order.
BANKING
10. Imposition of 70% Windfall Tax on Realized Profits From all Foreign Exchange Transactions by Banks.
On August 13, 2024, the Federal Government enacted the Finance (Amendment) Act, 2024, which introduced a windfall tax on profits realized from foreign exchange transactions by banks during the 2023 financial year. The rate of the tax is a one-off 70% tax on realized profits from all foreign exchange transactions by banks applicable for the financial year 2023.
11. CBN Suspends Charges on Deposits
On December 20, 2019, the CBN issued a revised "Guide to Charges by Banks, Other Financial Institutions and Non-Bank Financial Institutions" effective on January 1, 2020, which made provisions for processing charges on cash deposits exceeding specific amounts. For individuals, 2% processing fees for cash deposit transactions above ₦500,000 and 5% processing fees for cash withdrawals above ₦500,000. For Corporate, 2% processing fees for cash deposit transactions above ₦3,000,000 and 5% processing fees for cash withdrawals above ₦3,000,000
The CBN subsequently suspended the charges until April 30, 2024. The CBN in another circular dated May 6, 2024, announced the extension of the suspension of these processing fees on cash deposits of individuals and companies exceeding the above stated threshold until 30 September 2024.
12. Tax Treatment of Foreign Exchange Transactions
On June 14, 2024, the FIRS issued a circular on the tax treatment for foreign exchange transactions in Nigeria. This circular provides guidelines for assessing foreign exchange differences in determining assessable profit, clarifying the tax treatment of realised and unrealised exchange differences.
Unrealised exchange differences arise from currency revaluations without actual cash movement, while realised differences result from currency fluctuations affecting payments, receipts, or settlements.
For tax purposes, realised exchange gains or losses are either taxable income or deductible expenses. In contrast, unrealised gains or losses are excluded from taxation. Additionally, exchange differences related to tax-exempt items are neither taxed nor deducted but must be recorded in the tax computation schedule.
Footnotes
1 Cybercrime Act s.44(2)(a).
2 The CBN Circular No. PSM/DIR/PUB/LAB/017/005 dated May 17, 2024 "Re: Cybercrimes (Prohibition, Prevention, Etc.) (Amendment) Act 2024 – Implementation Guidance on the Collection and Remittance of the National Cybercrime Levy", accessible here https://www.cbn.gov.ng/Out/2024/CCD/WITHDRAWAL%20CIRCULAR%20ON%20CYBERSECURITY%20LEVY%2017052024.pdf
4 The Order, paragraph 1(1).
5 The Order, paragraph 1(2).
6 The Order, paragraph 5.
7 The Order, paragraph 10.
8 Notice of Tax Incentives on Deep Offshore Oil and Gas Production, 2024, s.1.
9 Notice of Tax Incentives on Deep Offshore Oil and Gas Production, 2024, s. 3.
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