Introduction

Employees have an inalienable, constitutional right to join any association of their choice. Especially where such an association will protect and promote their contractual and constitutional rights.

Employment associations are usually formed and registered as Trade Unions to fulfill the above objectives.

A Trade Union is described by the Trade Unions Act (as amended) to be a voluntary combination or association of employees in the same industrial sector of the economy, whether such employees are in temporary or permanent employment, with the principal purpose of promoting the terms and conditions of its members’ employment contracts.

Voluntariness of Trade Unions

Section 12(4) of the Trade Unions Act (as amended) (“TUA”) provides that “Notwithstanding anything to the contrary in this Act, membership of a trade union by employees shall be voluntary and no employees shall be forced to join any trade union or be victimised for refusing to join or remain a member.”

The TUA further prohibits any Trade Union from engaging in any form of discriminatory practices, including where such practices are based on an employee’s place of origin, tribe or community; religious or political opinions or affiliations.

Any infringement of any of the above statutory provisions, by any officer of a Trade Union, constitutes an offence, which on conviction attracts a fine.

Benefits of Trade Unions

One of the primary benefits of belonging to a Trade Union is the accessibility of its members to enjoy any benefit that accrues from any Collective Agreement that the Trade Union may negotiate on behalf of its members, with an employer or group of employers. A Collective Agreement is a good faith negotiated agreement regarding employees’ terms and conditions of service.

Another benefit accruing to belonging to a Trade Union is that such an association enables its members to collectively declare and undertake strike actions. Businessdictionary.com describes a Strike Action to be a collective, organised cessation or slow-down of work to compel an employer or a group of employers to accede to the employee’s legitimate demands.

A further benefit to belonging to a Trade Union is the enablement of a group of employees to peacefully picket an employer’s work premises in order to compel the employer to accede to the employees’ legitimate demands. Picketing can be described as one of the forms of industrial actions used by Trade Unions to persuade non-member employees and solicit public support before an all-out strike action is embarked upon. Picketing usually occurs where an employer does not accede to the legitimate demands of the employees.

It is however an offence to compel an employee or a group of employees to participate in any strike, work to rule or picketing activity.

Conclusion

Our Courts of Law have rightly continued to restrain Trade Unions from coercing, harassing, intimidating or threatening employees to join Trade Unions. Damages apply for any infringement of this statutory regulation.

Twenty-first century industrialisation, with the aggressive privatisation of previously held government enterprises have continued to dwindle the efficacy and relevancy of Trade Union movements.

The above developments are further exacerbated by the inability, and in some instances, the unwillingness of Trade Unions to modernise their trade union practices; and to also put their employees’ members over-all interest, over and above those of the Executive Members of the Trade Unions.

Disclaimer

This is a free educational material. It does not serve as a source of solicitation, advertisement or the offering of legal services or advice of any kind. No Client/Attorney relationship is therefore created. Readers are strongly advised to always seek from licensed Legal Practitioners, competent legal counselling relevant to their specific factual situation.

Intellectual Property Protected!

This material is protected by International Property Laws and Regulations. This material can therefore only be reproduced or re-distribued for non-profit educational purposes under the strict condition that our Authorship of this material is explicitly acknowledged, and our above Disclaimer Notice is prominently displayed.

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Legal Alert – January 2018 – Deeds of Gift – Estate and Tax Planning

Introduction

Estate Planning, as a wealth management and transfer tool, continues to pose a challenge in practice, for many reasons; ranging from changing life circumstances, to adopting the most efficient tax structure for one’s estate.

Recently, more consideration is given to executing a Deed of Gift, when compared to the conventional practice of writing Wills. Parties intending to engage in Gift transactions will however do well to have a more robust understanding of the legal and tax implications of executing a Deed of Gift, in contrast to executing a Will.

Deed of Gift – Definition and Consequences

A Deed of Gift is a gratuitous arrangement that voluntarily transfers and delivers the legal ownership, with the physical control over an existing real or personal property, by its owner (“the Donor”) to another person (“the Donee”) without any compensation, consideration or payment emanating from the Donee to the Donor, for the Gift.

Generally also, a Deed of Gift, once executed and delivered to a Donee, is irreversible and irrevocable. Note also that a Gift that is not delivered to the Donee is invalid in Law.

Although a Deed of Gift is generally said to be irreversible and irrevocable, it could still be set aside on any of the following grounds: – (i) cases where the Gift was given by fraudulent means; (ii) Gifts given under a misrepresentation or mistake of the surrounding circumstances regarding the Gift; (iii) Gifts transferred with the intention to defraud Creditors or evade Tax; (iv) cases where the Donor lacked the legal capacity to make the Gift.

Types of Gifts

There are three (3) common types of Gifts; namely: – (i) Inter Vivos Gifts; (ii) Gifts Mortis Causa; and (iii) Testamentary Gifts.

An Inter Vivos Gift is a gift that is conveyed/transferred during the lifetime of the Donor – not by a Will or in contemplation of the Donor’s imminent death – with the sole intention of irrevocably surrendering the physical control of the Gift to a Donee, who must be alive at the time the Gift is delivered to the Donee.

A Gift Mortis Causa is a Gift made in contemplation of the Donor’s imminent death.

The last type of Gift is a Testamentary Gift which is a Gift convened in a Donor’s Will.

In Nigeria however, there are legal commentaries which hold the view that a Gift of Landed Property, once delivered and registered during the lifetime of the Donor and the Donee, becomes irreversible and irrevocable by the Donor. Where any condition is imposed on such a Gift, such a Gift of real property may be deemed to be a Tenancy and not a Gift.

In the case of Anyaegbunam v. Osaka (2003) 3 SC 1 @ 14, the Supreme Court held that:- “A gift inter-vivos is an act whereby something is voluntarily transferred from the possessor to another person, with the full intention that the thing shall not be returned to the donor, and with the full intention on the part of the receiver to retain the thing entirely as his own without restoring it to the giver … The essential thing to consider is that the Gift is complete when the Donee has accepted it, if that condition is satisfied, the donor has no right to revoke the gift.”

Deeds of Gift and Wills Compared

The first and most obvious advantage that a Deed of Gift has over a Will is that a Deed of Gift comes into effect immediately the Gift is delivered to the Donee, during the lifetime of the Donor. Rules regulating Intestacy and Wills do not therefore apply to Deeds of Gift.

Other advantages that a Deed of Gift have, when compared to a Will, is that a Deed of Gift, especially where it is stamped and registered, is less likely to be challenged by way of a Law Suit on the demise of the Donor. This is as the Donee has already assumed ownership and physical control over the asset or Gift during the lifetime of the Donor.

Registration Requirements

By the provisions of the Land Use Act (“LUA”) and the Lagos State Land Registration of Titles Law 2015 (“LRTL”), any transfer of any interest in Land, by a Donor to a Donee, must be registered at the Lagos State Land Registry, using the Land Information Management System (“LIMS”).

The prior consent of the Governor of the State where the Land is located must however be obtained before any registration is done at the Land Registry.

Failure to register any Deed of Gift which transfers any interest in landed or real property will make such an unregistered land instrument inadmissible in any judicial or arbitration proceedings.

Taxation and Deeds of Gift

In many jurisdictions, both the Donor and the Donee to a Deed of Gift are obligated to file Tax Returns disclosing such a gift.

Although there are no direct statutory provisions relating to Deeds of Gifts, the Second and Third Schedules to the Personal Income Tax Act (as amended) (“PITA”) appear to imply that a Gift from a Donor to a Donee is exempted from personal income tax as no gain or profit from any trade, business, profession or vocation has occurred. Where the Donee of the Gift however earns or gains some income, in the hands of the Donee, such subsequent gain or profit will attract Personal Income Tax; and Capital Gains Tax where the Donee sells the Gift.

The above tax exemption does not however apply to Stamp Duties, Registration and Governor’s Consent Fees provisions which any Deed of Gift, with a real estate component, must bear.

Conclusion

In the past, some Donors have utilised Deeds of Gifts as a vehicle to evade Tax, other Governor’s Consent and Registration fees provisions. The recent economic recession has however compelled some State Governments to become more diligent and vigilant in enforcing existing Land Registration and Tax Compliance provisions regarding Deeds of Gifts.

A discerning Donor, working with a Solicitor experienced in Estate and Tax Laws, must carefully consider how the above legal and tax provisions will impact on his or her intentions regarding his or her estate.

Also, the continuing call for amendments to the existing Tax Laws should take cognisance of the lacuna in the current tax laws especially when it comes to the tax treatment of Deeds of Gifts. An option to consider is the practice in some other jurisdictions where a particular value of a gift is deemed tax-free, with any higher value on the same gift bearing some tax assessment on a graduated basis.

Bibliography/Acknowledgments

Black’s Law Dictionary

Property Law Practice in Nigeria by Y. Y. Dadem, Esq. Ph.D.

Encyclopedia of Forms and Precedents

Disclaimer

This is a free educational material. It does not serve as a source of solicitation, advertisement or the offering of legal services or advice of any kind. No Client/Attorney relationship is therefore created. Readers are strongly advised to always seek from qualified Legal Practitioners, competent legal counselling to their specific factual situation.

Intellectual Property Protected!

This material is protected by International Intellectual Property Laws and Regulations. This material can therefore only be reproduced or re-distributed for non-profit educational purposes under the strict condition that our Authorship of this material is explicitly acknowledged, and our above Disclaimer Notice is prominently displayed.

Introduction

It is becoming more common to find civil disputes having Police participation in contravention of the provisions of the existing applicable Laws. Recent legislation on this matter, like the Administration of Criminal Justice Act, 2015 remain blurred in day-to-day activities.

A brief examination of some of the existing Statutes and Case Law regarding Human Rights and the powers of the Police to arrest a person with or without a Warrant are provided in the following paragraphs

Human Rights Protection.

Nigeria is a signatory to both the United Nations Declaration of Human Rights, and the African Charter on Human Rights. Nigeria has also domesticated both Charters in her local Laws.

In recognition of the atrocities that cumulated into the Second World War, the United Nations Declaration of Human Rights compulsorily require Member States, who are signatories to this Charter, to treat every human being with dignity, and fairly at all times. Thus, Article 9 of this Charter provides that “No one shall be subjected to arbitrary arrest, detention or exile.”

The 1999 Constitution of the Federal Republic of Nigeria (as amended) reiterates the above provisions of the United Nations Charter on Human Rights when it guarantees in Section 35 the right of every person to his or her personal liberty except where such liberty is encumbered or restrained or controlled by the due process of the Law; i.e. the execution of a Court Order or Judgment.

The personal liberty of every person is further enshrined in the Administration of  Criminal Justice Act, 2015 (“ACJA”) by among other things, guarantee to every person the right to remain silent and not answer any questions until a Lawyer or such other person of the person or  suspect’s choice is present.

Protocols of Arrest

Section 4 of the Police Act empowers the Police to detect and prevent the commission of any crime, apprehend any suspected offender, preserve the Law, protect lives and properties, etc.

In the performance of its duties, the Police must ensure that it adheres to various Human Rights Protection Protocols, some of which include mandatorily informing a Suspect of the ground or grounds for an arrest except where the offence was actually committed in the presence of a Police Officer or the Suspect was fleeing the scene of the commission of an offence or escaping prior lawful custody.

A Suspect arrested by the Police also has the constitutional right to remain silent and avoid answering any question until he or she has consulted a Lawyer or any other person of his choice. The Police are also required to inform a Suspect’s next of kin or relative of any arrest, at no costs to the Suspect or the Suspect’s relatives.

The practice of a person being arrested in place of a Suspect is now prohibited by Law. A Suspect shall also not be arrested merely for committing a civil wrong or breaching a contract.

Lastly, Section 8 of the ACJA provides that every suspect shall be accorded humane and dignified treatment whilst in the custody of the Police. And no Suspect shall be subjected to any form of torture, cruel, inhumane or degrading treatment.

Warrants and Release

The commonly accepted practice is for a Suspect to be arrested with a Warrant signed by a Judge or Magistrate. At a preliminary investigative stage, a letter of invitation from the Police may be served on a person of interest.

As discussed above, where the Suspect commits the offence in the presence of a Police Officer, or flees the scene of the commission of the offence, or from lawful custody, such a Warrant of arrest may not be necessary or required.

Where a person is arrested without a Warrant for a non-capital offence, which offence is not punishable by death, and it is impracticable to arraign such a Suspect before a Court of Law with competent jurisdiction over such a matter, such a Suspect must be released on administrative Police Bail within twenty-four (24) hours of such an arrest.

A release on bail must be on reasonable conditions which ensure that the Suspect is produced whenever required in the future.

Where a Suspect, in a non-capital offence is not released with twenty-four (24) hours after arrest, a Court with competent jurisdiction can on a proper application been made on the Suspect’s behalf, order the release of such a Suspect on bail, on such conditions as the Court deems appropriate.

Case Law on Police Arrest and Contracts

Nigerian Courts have consistently held that it is unlawful for the Police to be involved in any way, in the interpretation or enforcement of contracts; and of any other civil dispute. In the case of McLaren v. Jennings, the Court of Appeal held in 2003 that it was unlawful for the Police to arrest and detain the Appellant with regard to the collection of a debt; this is as under the Law, the Police is not a debt collection Agency.

In addition to damages being awarded for any unlawful arrest and detention, an aggrieved person also has a right, under the Law of Tort, to sue both the Police and the Complainant for malicious prosecution and compensatory damages.

Conclusion

As commendable as the Statutes on this subject are, their correct application and enforcement in day-to-day life, continues to be a mirage, for many reasons. Prominent among these reasons is the lack of public enlightenment of the provisions of the Law on the subject; and the enforcement of the punitive deterrent consequences for any breach of the Law.

Disclaimer

This is a free educational material. It does not serve as a source of solicitation, advertisement or the offering of legal services or advice of any kind. No Client/Attorney relationship is therefore created. Readers are strongly advised to always seek from qualified Legal Practitioners, competent legal counselling to their specific factual situation.

Intellectual Property Protected!

This material is protected by International Intellectual Property Laws and Regulations. This material can therefore only be reproduced or re-distributed for non-profit educational purposes under the strict condition that our Authorship of this material is explicitly acknowledged, and our above Disclaimer Notice is prominently displayed.

Introduction

The economic potential that the Tourism Industry holds, both internally and externally, especially in diversifying the economy away from a mono crude oil export economy, continues to be magnified as the economy slowly recovers from a recession.

One of the recent attempts to harness the opportunities in the Tourism Industry is the second reading of the Nigerian Tourism Development Corporation (Repeal & Re-enactment) Bill, 2017 at the National Assembly. This Bill has elicited a lot of concern from various stakeholders in the Tourism and Hospitality Industry such that an appraisal of some of its provisions will make for a better informed opinion.

Tourism Development Bill

The Nigerian Tourism Development Corporation Bill, 2017 (“NTDC Bill”) seeks to repeal the Nigerian Tourism Development Corporation Act (“NTDC Act”), and in its place establish the Nigerian Tourism Corporation (“NTC”) to among other things develop, promote, regulate, accredit, grade, classify and supervise every aspect of the Tourism Industry in Nigeria.

The NTC Bill further contemplates the establishment of a Tour Operating Company (“TOC”), with offices in each of the six (6) geo-political zones. TOC is to establish tour services within and outside of Nigeria.

Some of NTC’s funding options includes the levying of a Tourism Visa Fee on all in-bound International Travellers to Nigeria; a Tourism Departure Levy on all out-bound Travellers; a Tourism Development Contribution Levy of 1% per Hotel room rate or such flat fee as maybe fixed by NTC; and a Corporate Tourism Development Levy to be charged on the revenue of Banks, Telecommunications and other corporate entities.

Constitution, Case Law and Tourism

In 2010, the Federal Government of Nigeria (“FGN”) challenged the constitutionality of the following statues enacted by the Lagos State House of Assembly:- (i) The Hotel Licensing Law; (ii) The Hotel Licensing (Amendment) Law; and (iii) The Hotel Occupancy and Restaurant Consumer Law. FGN contended that these legislations usurped and undermined the provisions of Section 4(2)(d) of the Nigerian Tourism Development Act.

The Lagos State Government, in response to FGN’s above legal challenge, contended that under the 1999 Constitution of the Federal Republic of Nigeria, Hospitality and Tourism Enterprises, not being among the items in the Exclusive and Concurrent Legislative Lists, were residual matters in which the States’ Houses of Assembly can legislate. To the extent that some of the provisions of the NTDC Act are inconsistent with the provisions of the 1999 Constitutional regarding Tourism and Hospitality regulation, such inconsistency should be held by the Supreme Court to be null and void, and of no effect whatsoever.

The Supreme Court dismissed FGN’s claims in this suit, and unanimously upheld the above submissions of the Government of Lagos State. This is especially as Nigeria operates a Federal System of Government, with each State in the Nigerian Federation enjoying its separateness and independence from the Federal Government.

The Supreme Court further held that by virtue of the provisions of Section 4(1-3) and item 60(d) of Part 1 of the Second Schedule of the 1999 Constitution, FGN can only exercise jurisdiction over Tourist Traffic; and Tourist Traffic the Supreme Court described to include only the ingress and egress of International Tourists from other countries, via visa controls.

Conclusion.

Until the provisions of the above referred 1999 Constitution, which provisions were followed by the Supreme Court in the above case of Attorney General of the Federation v. Attorney General of Lagos State (2013) 7SC (Pt.1) 10 @ 88 – 90, are amended or repealed, the provisions in the NTC Bill regarding the regulation of the Tourism Industry, will if passed into law, again be held to be invalid, null and void once such provisions are challenged in a Court of Law.

Also, most of the financial provisions in the NTC Bill are inimical to the Tourism and Hospitality Industry which is already burdened by multiple and double taxes, a recessed economy with dilapidated infrastructure nationally, an unskilled 21st century compliant manpower pool, aggressive foreign tourism competition for other destinations, etc. Examples of such injurious provisions include a Tourist Visa Fee, a Tourist Development Levy, a 1% per room hotel Tourism Development Levy and a Corporate Tourism Development Levy.

The Federal Government will do well to concentrate on more essential National issues, than on Tourism and Hospitality Regulation which are better managed by States and Local Governments.

Lastly, the above cited Supreme Court decision centered solely on who has the Constitutional authority to legislate on the Regulation, Registration, Classification and Grading of Hospitality and Tourism Businesses in Nigeria. Arguments and a final decision on whether or not the Lagos State Hotel Occupancy and Restaurant Consumption Law can be administered concomitantly or at the same time with the Value Added Tax Act in Lagos State were not made in this case.

The continued application of the Value Added Tax Act and the Hotel Occupancy and Restaurant Consumption Law on the Hospitality Industry needs to be determined by a superior Court of Record as the application of both taxes on the same tax base increases the cost of consumption and jeopardises the growth of the Hospitality Industry. A preferred option will be for the 1999 Constitution to be amended and the Value Added Tax Act to be repealed with States and Local Governments allowed to administer any form of consumption tax in their jurisdiction.

Disclaimer

This is a free educational material. It does not serve as a source of solicitation, advertisement or the offering of legal services or advice of any kind. No Client/Attorney relationship is therefore created. Readers are strongly advised to always seek from qualified Legal Practitioners, competent legal counselling to their specific factual situation.

Intellectual Property Protected!

This material is protected by International Intellectual Property Laws and Regulations. This material can therefore only be reproduced or re-distributed for non-profit educational purposes under the strict condition that our Authorship of this material is explicitly acknowledged, and our above Disclaimer Notice is prominently displayed.

Introduction

The number of commercial transactions that are now denominated in foreign easily convertible currencies, especially the United States Dollars, astronomically increased in the last decade, mostly due to the benefit of retaining earnings in US Dollars, as opposed to the Naira, which is the national currency in Nigeria.

The fall in crude oil prices, which resulted in recession and in the devaluation of the Naira, has however adversely affected US Dollar based transactions most of which are/were sourced and are required to be retired at higher parallel market exchange rates.

Businesses with transactions denominated in foreign currency must therefore familiarise themselves with the minimum tax principles which will impact on such transactions; and in the process, manage the associated Foreign Exchange (“FX”) risks arising thereform.

Taxation of FX Profits

Elementarily, it is the profits of a company, from all its trade or business, and not its revenue or turnover, that is taxed on a preceding year basis. And tax assessments and payments must be in the currency of the transaction.

To earn a profit, a company must deplore resources and incur expenses. However, only the expenses of a company which are wholly, exclusively, necessarily and reasonable incurred in the production or acquisition of such profits enjoy a tax deduction from the company’s revenue before the profits of such a company are taxed. Examples of such expenses include business loans and interest paid on such business loans, business premises rent, office maintenance and repairs, plants and machineries, bad and doubtful debts, salaries wages and emoluments, pensions, research and developments, charitable donations, etc.

Advance earnings however suffer or bear an advance withholding tax at the tax rate of ten per cent (“10%”) for corporate entities; and five per cent (“5%”) for individuals. Receipts or certificates obtained after such withheld tax are usually subsequently used by the earning party to net-off its final tax at the end of the subject financial year of tax assessment.

FX Taxation

The taxation of profits accruing from foreign exchange denominated transactions is usually not contentious as can be deciphered from the above. The same cannot be said of FX losses where the tax authority traditionally and cautionarily is quick to discourage a tax deduction for FX related losses, which losses usually arise from FX rates fluctuations.

A good example of such a contentious situation can be found in the Supreme Court decision in Shell Petroleum Development Company v. Federal Board of Inland Revenue (Shell v. FBIR), which decision was delivered on 27th September 1996. The Supreme Court held in this case that the FX losses that the Appellant suffered were equitably, and following the doctrine of Accord and Satisfaction, tax deductible expenses which were wholly, necessarily and incidentally incurred in the cause of the Appellant abiding with the Agreements it entered into with the Federal Government of Nigeria (“FGN”) in order for the Appellant to continue to undertake its petroleum operations in Nigeria.

The Supreme Court observed in Shell v. FBIR that if the Petroleum Profits Tax (“PPT”) due were paid by the Appellant in Naira, as the Petroleum Profits Tax Act applicable at the time required, the Appellant would not have incurred any foreign exchange losses. The latter would have also occurred if the Respondent’s principal, who is the FGN, had received the PPT in Naira only to suffer FX losses when converting the Naira to British Pounds Sterling.

Accounting Treatment of FX

The International Financial Reporting Standards (“IFRS”) IAS 21 requires a foreign currency transaction to be recorded, on its initial recognition, in the functional or national currency of the concerned company, applying the spot FX rate at the date of the transaction.

IFRS IAS 20 goes further to require that at the end of each reporting accounting year-end, the foreign currency monetary items are required to be converted into the functional or national currency using the closing FX rate for the currency of the transaction.

Any resulting exchange rate difference – the FX rate at the date of the transaction and the FX rate at the closing of the transaction –  whether a profit or a loss, are required to be recognised in the Accounting Books  of the company at the date when they each arise. Where the transaction is a continuing one, IFRS requires such investment to be initially recognised under Other Comprehensive Income and reclassified to a profit or loss position on the disposal or completion of the transaction or investment.

In summary, assets and liabilities are required to be translated and booked at the FX rate, at the end of the accounting period of each transaction. Income and expenses are required to be translated at the FX rate existing on the dates of each of these events. And lastly, FX rate differences are recognised under Other Comprehensive Income and subsequently reclassified to the Profit and Loss Account on the disposal or completion of the FX related transaction.

Conclusion

In an article by Jenny Bourne Wahl, published in the National Tax Journal, this writer while considering the United States of America Tax Reform Act 1986, was of the opinion that the timing of the recognition of FX gains and losses directly influence the effective tax rate that will apply to foreign assets and liabilities. This writer concluded that legislation which allows FX gains or losses to be taxed on the realisation of the gain or loss, as opposed to when the loss or gain accrues, or comes into existence, is a much stronger tax incentive to promoting transactions in the FX market.

The opinion of the above writer is tandem with IFRS IAS 21 as summarised above for your compliance.

Disclaimer

This is a free educational material. It does not serve as a source of solicitation, advertisement or the offering of legal services or advice of any kind. No Client/Attorney relationship is therefore created. Readers are strongly advised to always seek from qualified Legal Practitioners, competent legal counselling to their specific factual situation.

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Introduction

Globalisation and Technological Advancements are encouraging more Nigerian Businesses to diversify their spheres of businesses, into other countries; especially West and South African countries.

As commendable as the expansionist agenda of these Nigerian companies may be, there are Nigerian and the foreign country specific tax obligations that should be carefully considered before valuable human and financial resources are expended, or continue to be expended on such ventures.

Basis of Companies Income Tax Applications

The underlining basis for imposing Companies Income Tax on the profits of a Nigerian incorporated or registered company are as follows; Companies Income Tax is imposed on All the world-wide Profits of a Nigerian Company, from All its Sources of Income or Profits, on such Profits that accrue in, are derived from, or are brought into, or are received in Nigeria.

The Companies Income Tax Rate in Nigeria is Thirty Per Cent (30%); and this corporate tax must be paid in the currency in which the Profit or Income is earned.

Mandatory Filing of Tax Returns

All Companies, whether resident or non-resident, whether tax exempt or not tax-exempt, are mandatorily required to file a Self-Assessment Tax Return disclosing all the sources of their income and profits earned, not later than six (6) months after the end of such a Company’s prior financial year end. Stiff Punitive Fines apply if any company is found guilty of any infraction in failing to file a Self-Assessment Tax Return within the timeline provided.

Minimum Tax Provisions

The Companies Income Tax Act (as amended) (“CITA”) also provides that where any Company, in any year of tax assessment, declares a loss or no taxable income from all its business sources, having carried on business for four (4) or more years, the Tax Authority is empowered to impose on such a Company, a Minimum Tax assessed at the rate of 0.25% of the Company’s turnover where such turnover is less than  N500,000; plus an additional 0.125% of such a Company’s turnover that is in excess of the initial N500,00.00 (Five Hundred Thousand Naira).

Companies that are exempted from the Minimum Tax provisions include those carrying on agricultural trade or business; companies with at least 25% imported equity capital; and companies that have carried on business for less than four (4) years.

Best Judgment – Arm’s Length/Artificial Transactions & Transfer Pricing Regulations

On the sensible assumption that a Company may not likely disclose all its world-wide income, from all sources, in such a Company’s Self-Assessment Tax Returns; or where the declared profits do not match the minimum industry returns for the subject period; the Tax Authority is empowered by CITA to, using its best judgment, impose a fair and reasonable tax assessment on the Company’s turnover for the period under tax assessment.

There are also now Transfer Pricing Regulations (“TPR”), which compliment the provisions of CITA regarding the taxation of arm’s length, fictitious or artificial transactions. Tax and TPR rules empower the Tax Authority to make necessary tax adjustments on income transactions that are reasonably presumed to be artificial, or fictitious, or not at arm’s length basis; i.e. transactions between associated companies devoid of independence or neutrality; or where the control of one or other entities is exerted by another or other entities.

Tax Reliefs for Nigerian Foreign Businesses

The Companies Income Tax Act (as amended) provides that any dividend, interest, rent or royalty derived by a Nigerian Company from any country outside of Nigeria, which income is brought into or received in Nigeria through formal licensed financial institutions, is exempted from Companies Income Tax in Nigeria.

It is envisaged that before the above mentioned tax exemption can apply, the Nigerian company will have disclosed to the Tax Authority via its mandatory Annual Self-Assessment Tax Returns, its undertaking in a foreign company that is outside of Nigeria.

It is also envisaged that as with foreign investments made in Nigeria, whose Investors are required to import their capital and obtain Capital Importation Certificates before they can in future repatriate their earnings through formal financial institutions, Nigerian Companies may also be required to provide necessary paperwork of the export of their capital from Nigeria to the foreign country before any return on such foreign investment can enjoy tax exemption in Nigeria.

Relief from Double Taxation is another tax relief to consider. Where a Nigerian Company earns dividend or other income from outside of Nigeria from which it cannot claim the above mentioned tax exemption, such dividend or other income where it originates from a Commonwealth country with whom Nigeria has a gazetted Double Taxation Treaty (“DTT”), could enjoy a tax relief at the tax rate provided for in the DTT.

Some of the countries with whom Nigeria currently has DTT with include Belgium, Canada, China, Czech Republic, France, Netherlands, Pakistan, Philippines, Romania, Slovakia, South Africa and the United Kingdom.

Though Article 40(5) of the Economic Community of West African States (“ECOWAS”) Revised Treaty enjoins Member States to avoid cases of Double Taxation between Community Citizens of Member States, and to grant assistance in combating International Tax Evasion through the execution of a Double Taxation and Assistance Convention, there is presently no record of such a Convention ratified by ECOWAS Member States.

Conclusion

Though Nigeria is a Member of many international economic organisations, such as ECOWAS, the African Union, the Commonwealth, etc, Nigeria does not have DTTs with very many of these Member countries. This failure has impeded free trade, as well as promoting double taxation and tax evasion in the process.

Disclaimer

This is a free educational material. It does not serve as a source of solicitation, advertisement or the offering of legal services or advice of any kind. No Client/Attorney relationship is therefore created. Readers are strongly advised to always seek from qualified Legal Practitioners, competent legal counselling to their specific factual situation.

Intellectual Property Protected!

This material is protected by International Intellectual Property Laws and Regulations. This material can therefore only be reproduced or re-distributed for non-profit educational purposes under the strict condition that our Authorship of this material is explicitly acknowledged, and our above Disclaimer Notice is prominently displayed.

Legal Alert – April 2017 – Contracts – Time is of the essence

Introduction

A very important provision in many contracts is the obligation regarding the time within which each component of each contract must be performed. Unfortunately, this important contractual requirement is held more in disobedience, contempt or abeyance, than in strict compliance.

In some instances, a contract could be silent with regard to the exact time within which the obligations in the contract are to be performed.

An examination of the legal implications of both instances described above, will be provided in the following paragraphs.

Time is of the Essence

Time is said to be of the essence in the performance of the terms and conditions of a contract, where the parties to the contract expressly stipulate that time will be of the essence in the performance of their contractual obligations.

Time will also be held to be of the essence in the performance of the terms and conditions of a contract where the circumstance(s) for its performance, or the nature of the subject matter of the contract, reasonably implies and or inputs a strict adherence to its timely performance. An example is the urgent purchase and need for immediate possession of a property due to the expiration or loss of the possession of a previous property.

Where time is stated to be of the essence in a contract, the parties can by mutual consent, vary or extend the time for the performance of the contract.

Courts of Law and Equity will be very reluctant to enforce a time is of the essence provision in a contract where such a contractual obligation is punitive in nature.

Contract Silent as to Time

Where a contract is silent regarding the time or period within which its terms and conditions are to be performed, the Law Courts have usually applied the equitable principle that all contractual obligations should be performed within a reasonable period of time.

Also, where a contract is silent as to the time for the performance of its terms and conditions, a party who suffers unreasonable delay can serve notice requiring time to be of the essence in the performance of the contract; especially where the delay persist(s) despite repeated entreaties for performance. This does not however restrain the innocent party from terminating the contract in accordance with the terms of the contract.

Breach of Time Obligations

Any failure to adhere to the performance of a contract, within the period agreed, or within a reasonable period of time if no express time frame is provided for in the contract, can amount to a fundamental breach of the contract from which compensatory damages may be awarded in punishment.

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