{"id":4413,"date":"2018-09-23T18:15:48","date_gmt":"2018-09-23T18:15:48","guid":{"rendered":"https:\/\/www.aziza.com.ng\/read\/?p=4413"},"modified":"2024-11-10T10:33:15","modified_gmt":"2024-11-10T10:33:15","slug":"tax-exemption-for-government-institutions-and-corporate-entities-in-nigeria","status":"publish","type":"post","link":"https:\/\/www.aziza.com.ng\/read\/tax-exemption-for-government-institutions-and-corporate-entities-in-nigeria\/","title":{"rendered":"Tax Exemption For Government Institutions and Corporate Entities in Nigeria"},"content":{"rendered":"

TAX POLICY AND LEGISLATION DEPARTMENT<\/h2>\n

Clarification on the Taxability of Investment Incomes Earned by\u00a0Government Institutions and Corporate Entities Exempted by Law
\nfrom Taxation<\/p>\n

1. The Federal Inland Revenue Service (FIRS) has in recent time been\u00a0inundated with inquiries from Banks, Companies under Pioneer Status,\u00a0Ministries, Departments and Agencies of Governments to make\u00a0clarification on their tax status in relation to incomes earned from\u00a0investment sources. The thinking by officials of those organisations which\u00a0are exempted from income tax or companies whose profits are being\u00a0exempted from income tax is that such profit\/income exemption status\u00a0granted to them should also qualify them for exemption from all forms of\u00a0corporate or personal taxes, including consumption taxes, particularly the\u00a0Value Added Tax (VAT). This view is erroneous and completely at variance\u00a0with the intention of the law.<\/p>\n

2. The provisions of Section 23(1)(n) of the Companies Income Tax\u00a0Act, CAP C21, LFN,2004 clearly provides that \u201cnothing in this section shall\u00a0be construed to exempt from deduction at source, the tax which a\u00a0company making payments is to deduct under Sections 78,79 or 80 of\u00a0this Act \u2026shall apply to a dividend, interest, rent or royalty, which is a\u00a0part of the profits or income referred to in subsection (1)(a) to (f) and (h)\u00a0to (i) of this Section\u201d. The reference to \u2018company\u2019 in the law means any\u00a0company or corporation, established by or under any law in force in\u00a0Nigeria or elsewhere and it is on a \u201ccompany\u201d that the duty to deduct\u00a0withholding tax is placed, since it is the company that is making\u00a0payments to various beneficiaries. The 10% WHT charged on such\u00a0investment incomes shall become the final tax in the hand of the\u00a0beneficiary.<\/p>\n

3. For the purpose of clarity, FIRS wishes to inform the public and all\u00a0our stakeholders, Banks, Ministries, Departments and Agencies of\u00a0Government, including Corporations and Regulatory Agencies that all\u00a0investment incomes in the nature of interests\/royalties, rent and\u00a0dividends are subject to Withholding taxes (WHT) at the prescribed tax\u00a0rate of 10% in line with Sections 78, 79, 80 of Companies Income Act. No\u00a0organisation or company is exempted from the payment of Withholding\u00a0Tax on any investment incomes, even though these organisations may be\u00a0under a tax exemption regime or pioneer exemption status. It should be\u00a0understood that such tax exemption status relates only to profit\/income\u00a0from businesses but does not include passive or unearned incomes.<\/p>\n

4. The general public is hereby requested to note the contents of this\u00a0public notice for compliance and guidance. FIRS will henceforth no longer\u00a0issue individual letters on inquiries relating to this subject from\u00a0stakeholders, taxpayers\/tax agents, Banks and Government Institutions\u00a0for clarification on taxability or otherwise of investment incomes accruable\u00a0to any investors, including government agencies which have placed funds\u00a0with financial institutions or deriving dividends from companies where\u00a0they have some shareholdings.<\/p>\n

 <\/p>\n

FIRS Tax Payment Guidelines:<\/h2>\n