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In this alert:
FHC upholds FIRS’ application of increased Tertiary Education Tax rate to full accounting period despite mid-year effective date
Background
Shell Exploration and Production Africa Limited (“Shell” or “the Company”) instituted an action at the Federal High Court to contest the Federal Inland Revenue Service’s (“FIRS” or “the Service”)1 application of the increased Tertiary Education Tax (TET) rate of 3%, introduced by the Finance Act 2023 (FA 23) which was effective from 1 September 2023.
Prior to the Finance Act 2023, section 1(2) of the Tertiary Education Trust Fund (Establishment) Act (TET Act) prescribed a TET rate of 2.5% of assessable profit. The Finance Act amended the rate to 3% effective 1 September 2023. The Company computed TET at 2.5% for income earned from 1 January to 31 August 2023, and 3% for income earned from 1 September to 31 December 2023.
However, during the filing on TaxPro Max, the system applied a flat 3% rate to the entire 2023 accounting period. Shell argued that the Service wrongly applied the 3% rate retrospectively to income earned between 1 January and 31 August, 2023 and sought a court order declaring the additional payment unlawful and requesting a refund or tax credit.
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