Nigerian companies are now liable to income tax at 60%. That is if the new judgement of the tax appeal tribunal on excess dividend tax is sustained. This may be ridiculous but it is true! At a time when many countries are reducing their tax rates to attract and retain investments, Nigeria seems to be moving in the opposite direction.
On 18 July 2014 the Tax Appeal Tribunal in a case between Oando Plc and the Federal Inland Revenue Service (FIRS) ruled in favour of the FIRS. The decision was based on the Tribunal’s interpretation of Section 19 of the Companies Income Tax Act as applicable to dividend distribution.
The decision creates more uncertainty on the issue of "excess dividends" tax as the Tribunal did not follow an earlier decision of the Federal High Court between the same parties and on almost identical facts. As a lasting solution, the National Assembly should amend the law to make it clear that sector 19 is not applicable to profits which have already been taxed and those that are specifically exempted from tax.