The Federal Inland Revenue Service (“FIRS”) has recently issued a Public Notice expressing its opinion that the tax exemption enjoyed by government institutions and corporate entities with pioneer status, does not exempt the incomes of such entities from corporate and personal income taxes; especially the advance withholding tax.

The above opinion of FIRS is premised on the provisions of Section 23(1) (n) of the Companies Income Tax Act (“CITA”).

The legal effect of the FIRS opinion is that all passive incomes – dividends, interest, rent or royalties – are liable to withholding tax, which is an advance and final tax on such income.

The year-end profits of the entity that enjoys tax exemptions, like government establishments and any corporation with pioneer status, will not however suffer any form of tax on its final profits during the period of the tax exemption.