Vi-M Professional Solutions

Author: Vi-M Professional Solutions

  • President Buhari Signs Finance Bill into Law

    President Buhari Signs Finance Bill into Law

    This morning, President Buhari signed the Finance Bill into Law. 

    According to President Buhari, this is the first time, since the return of democracy in 1999, that a Federal Budget is being accompanied by passage of a Finance Bill specially designed to support its implementation, and to create a truly enabling environment for business and investment by the private sector.

    The Finance Act introduces significant changes to 7 tax laws as follows:

    1. Companies Income Tax Act
    2. Value Added Tax Act
    3. Customs and Excise Tariff etc. Act
    4. Personal Income Tax Act
    5. Capital Gains Tax Act
    6. Stamp Duties Act
    7. Petroleum Profits Tax Act

    Overall, the Act seeks to:

    • Reform Nigeria’s tax laws to align with global best practices;
    • Support Micro, Small and Medium Enterprises in line with the Country’s Ease of Doing Business Reforms;
    • Incentivise investments in infrastructure and capital markets;
    • Raise Government revenues

    Our articles, detailing the changes in Tax Laws as introduced by the Finance Act (final harmonised/ signed version), and the practical implications, will be published in series in the coming days/ weeks.

    As recommended in our earlier newsletter, only proper and timely bookkeeping/ accounting, early issuance of audited financial statements, and proper tax advisory can help businesses successfully navigate the new Finance Act.

    Businesses can rest easy on any tax law changes with our Tax and Accounting Services Cover (TAS Cover) package once they subscribe here; or once they book an associated service here.

  • Happy Holidays

    Happy Holidays

    Thank you for being part of us yet again in 2019.

    With your support in 2019, we were able to:

    ✔️ Continue building on our past initiatives;
    ✔️ Unveil our brand-new website – www.vi-m.com;
    ✔️ Introduce our new service line – ERP and software consultancy for businesses;
    ✔️ Structure other exciting new initiatives and partnerships that are underway;
    ✔️ And the best of all, unveil the new face of our talent website- vi-mtalentassist.com; making it a total-person website for talents in Africa! vi-mtalentassist.com now features jobs, talents, women and work segment, talent lifestyle/grooming/cars, properties for sale/ rent, fashion, relationships, entrepreneurship awards, comedy, trending news, events, etc.- everything to aid the everyday total lifestyles of talents in work and business.

    As we close today officially for the year,

    We wish you the happiest holidays;
    Merriest Christmas; and
    Happiest New Year!

    We will resume our exciting business activities again on 6 January 2020.

  • A Christmas Note from the FIRS: 7-Day Notice to Tax Defaulters

    A Christmas Note from the FIRS: 7-Day Notice to Tax Defaulters

    8 days after the official handover to him (pending the Senate’s confirmation of the new Board), the Acting Executive Chairman of the Federal Inland Revenue Service (FIRS), Mr. Abiodun Aina, makes his debut with a 7-day Public Notice to tax defaulters, warning them of an impending nationwide tax enforcement exercise for recovery of all outstanding taxes..

    The Public Notice was issued on 17 December 2019 for the attention of all taxpayers (individuals, partnerships, enterprises, corporate organisations, ministries, departments and agencies) who are in default of payment of taxes arising from:

    1. Self assessment
    2. Tax audit
    3. Tax Investigation
    4. Transfer pricing audit
    5. Demand notices; and 
    6. Any other liabilities

    Taxes covered by the Notice, and the impending enforcement exercise include: 

    1. Petroleum Profits Tax
    2. Companies Income Tax
    3. Value Added Tax
    4. Withholding Tax
    5. Tertiary Education Tax
    6. NITDA Levy
    7. Stamp Duty
    8. Capital Gains Tax

    According to the Public Notice, all tax defaulters are expected to make good any outstanding tax liabilities within 7 days of the publication to avoid any inconveniences or disruptions in their operations.

    Read the details of the Public Notice.

  • OPTIMISING MICRO PENSIONS PLAN IN NIGERIA

    OPTIMISING MICRO PENSIONS PLAN IN NIGERIA

    Following the strategic objective of increasing persons participating in pension in Nigeria to at least 30% of the working population by 2024, the National Pension Commission (PENCOM) launched the “Micro Pension Plan” (MPP) on 28th March, 2019.

    The MPP is a pension scheme introduced to cover the informal sector of the economy which was hitherto excluded in the Pension Reform Act (2014) (“PRA, 2014”).  In simple terms, the MPP refers to an arrangement for the provision of pensions to the self-employed and persons operating in the informal sector in the Nigerian economy.

    It could be stated that the Micro Pension Plan is an extension to the coverage of Section 2(3) of the PRA 2014, as regards to the Application of Contributory Pension Scheme (CPS), where it stated that employees of organisation with less than 3 employees as well as self-employed are entitled to participate under the CPS in accordance with the guidelines issued by PENCOM.  

    However, questions such as whether private sector organisations employing between 3 and 15 employees can actually be allowed to partake in the MPP (since the PRA, 2014 did not expressly provide for this group), other questions regarding the guidelines, its application, effects on cost of business, implications as well as the benefits of the new scheme, have been raised since the launch of the scheme mostly by stakeholders in the informal sector.

    This article attempts to clarify some of these questions or concerns, highlight the differences between the MPP and the CPS, MPP benefits to participants from the informal sector as well as the economy at large, and likely challenges in its implementation.

    DIFFERENCES BETWEEN MPP AND CPS

    • Enabling legislation: The PRA 2014 is the enabling legislation that governs the administration and implementation of the CPS.  While the MPP can be said to be a subset of the PRA, but mainly administered through the PENCOM Guidelines for Micro Pension Plan, 2018.
    • Size of organisation: The CPS applies to all employees (and their employers) under employment in private organisation with more than 15 employees and employees in the public sector, while the MPP applies to employees in the informal sector (Private organisation with less than 3 employees) and the self-employed.
    • Persons liable: The CPS places the burden of compliance (deduction and remittance) on the employer or business owner, while the MPP only places a flexible/ voluntary burden on the Micro Pensions Contributor (MPC), who is the person registered under the Micro Pensions Plan and not on the owner of the business.
    • Rate of Contribution: The rate of contribution between the MPP and the CPS is different, so is the frequency of withdrawal and payment structure.  Under the MPP, contributions can be made daily, weekly or monthly (not regulated), whereas under the CPS, contribution is made only monthly (by the employer for contributions of both the employee and the employer).  

    The amount of contribution in the case of the MPP is solely dependent on the contributors’ pension aspiration and financial capability as against the fixed and strictly regulated rates applicable in the CPS.

    In addition, the MPP’s contribution is split into two (2), 40% for contingent withdrawals and 60% earmarked for retirement benefits, which is not the case under the CPS.

    • Registration: The CPS registration is mandatory and enabled by the law, therefore, all employees in the formal sector are mandated or obliged to be on the scheme. However, MPP registration is not mandatory and has not been enacted into law and compliance cannot be enforced.  It therefore suffices to say that compliance is voluntary and dependent on the appetite of the would-be contributor.
    • Eligibility: While the CPS is silent on the age of participation, but talks about persons in employment in both public or private sector of Nigeria, the MPP guidelines, section 6.1.1, allows for persons not below 18 years of age with source of income to participate in the scheme, irrespective of trade, business, professional body with or without contract or self-employed persons.
    • Withdrawals: In the case of the CPS, contributions are saved in the Retirement Savings Account (RSA) and cannot be withdrawn before retirement or the age of 50 years, whichever comes first or the contributor, can withdraw 25% of his funds if he is disengaged from employment after four months without securing another job.  While in the case of the MPP weekly withdrawal can be made from the contingent portion of the savings after 3 months from the date of first contribution.
    • Conversions: An MPP contributor is ‘eligible’ to convert to the mandatory CPS where he/she secures employment in the ‘formal sector’ with an organization that has three (3) or more employees. There is no conversion from the mandatory CPS to MPP. 

    GREY AREAS 

    The issue of whether private sector employers that have 3 to 15 employees in employment should comply mandatorily with the CPS, is still a grey area even under the MPP Guidelines. 

    One interpretation/ outlook that can help however, is that the MPP focuses on the informal sector, defined by the MPP as “employees in business entities, organisations and/or persons that are not ‘mandated’ to implement the Contributory Pension Scheme as provided in Section 2(1) of the Pension Reform Act, 2014”. 

    Section 2(2) of the PRA, 2014, only mandates employees in private sector employment, where there are 15 or more employees, to comply with the CPS. The PRA Act is silent on private sector organizations employing between 3 to 15 employees.

    To bridge this gap and controversies in interpretation of the provisions of the PRA, PENCOM, in 2015, had issued a Public Notice stipulating that employers of 3 to 15 employees are also mandated to comply under the CPS, even though the Act did not expressly provide so.

    Therefore, for the small business owner who is in a dilemma about how to optimise pensions, yet reduce extra cost of doing business applicable under the CPS, three recommendations can be made. 

    1. In a developing country like Nigeria, there is a thin line between the formal and informal sector. The MPP provides pension protection for players in the informal sector, therefore such small business owner can optimize pensions through the MPP, once he/ she can prove that his/her business operates in the informal sector.
    2. Employers with less than 15 employees can decide to completely opt out of the mandatory CPS on the strength of the provisions of Section 2(2) of the PRA, without any considerations for the Public Notice of the PENCOM, since a Public Notice is not an enforceable law.
    3. The small business owner can comply with pensions under the MPP to ensure future financial security for employees and self (which is the main intent of PENCOM on both the MPP and the mandatory CPS), but under a flexible, less burdensome, cost effective arrangement which the MPP affords.

    BENEFITS OF THE MPP

    To participants:

    • Employees and employers (owners) from the informal sector had not been adequately covered under the CPS.  The MPP now affords them an avenue to enjoy formal savings and harness the opportunities and benefits of the Social Protection Plan.
    • Participants in the informal sector had little or no means to avoid old age poverty, the introduction of the MPP aims to bridge this gap and help save for the future of such contributors.
    • The flexibility in contributions of MPP leaves no room for excuse, as there are provisions for convenient contributions and withdrawals.  The MPP is designed to be convenient to all class of the informal sector (high, middle and low income earners).
    • Employers in the informal sector do not need to contribute to employees’ pension scheme. This answers the question or concerns of additional cost of doing business. 
    •  The scheme gives room for contingent withdrawal, which would aid participants to have easy access to a portion of their savings in time of pressing moments.  The scheme is designed to improve the habit of savings amongst the informal sector contributors.

    To the economy:

    • The scheme is an avenue for government in the federal level to attain its strategic pension objective of reaching 30% of the working population in the country.  The scheme is a means for government to tap into the informal sector as it is no news that the informal sector is the highest employer of labour in Nigeria, employing an estimate of eighty million people.
    • It is envisioned that the scheme would increase the pool of investible funds by the government, thereby improving the Nigeria economy.
    •  The federal government plans that the implementation of MPP scheme could be used as a tool to reduce the level of aggregate old age poverty by 85%.
    • The scheme encourages savings culture in the economy.  Savings has always been an inherent issue in the economy as the informal sector lacks savings attitude which is as a result of their irregular flow of income.
    • If the MPP is widely adopted, it would improve the bankable number of persons in the country, thereby increasing financial literacy ratio.

    LIKELY CHALLENGES TO BE FACED BY THE MPP SCHEME

    • Sensitisation, awareness and participation: The MPP is in no doubt a vital tool in enhancing and improving the life of people in the informal sector, especially at retirement.  But the awareness by the informal sector is poor or inadequate.  People in the informal sector are yet to embrace or begin to adopt same.  Therefore, there is need to improve on sensitization, which would drive participation and improve awareness.
    • Financial illiteracy: A large number of people in the informal sector are either not financially literate or do not trust the government of the day.  These categories of people are market traders, hawkers, bus drivers amongst others.  Financial illiteracy becomes an obstacle in implementing the scheme as these people may not understand the benefit of the scheme because they do not understand the financial terms and most likely would not take advantage of the provision.
    • Capital outflow: These categories of businesses thrive as a result of business turn over.  Therefore, the administrators need to do a lot to demonstrate why such business owners should rather put their money in the MPP as against re-investing same in their business, which may in turn increase their financial position.

    RECOMMENDATIONS AND CONCLUSION

    It is a highly commendable attempt by PENCOM to include informal sector of the Nigerian economy in the pension scheme.  However, PENCOM needs to look at ways of mitigating or alleviating these challenges to ensure that the scheme is embraced so it can achieve its strategic objective.  

    It is recommended that improved awareness and sensitisation has to be made in both the rural and urban areas of the country with the aim to improve participation.  The Pension Fund Administrators have got to improve their footprint to the rural areas as participants should not spend too much in accessing the necessary details to operate the MPP.  Their presence would also aid in bringing applicable benefits of the Scheme closer home. 

    It is necessary to attach greater incentives to the scheme in order to appeal to people in the informal sector. Also, necessary advanced computerised tools have to be provided in order to enable easy implementation of the Scheme.

  • FEC Proposes Increase in VAT Rate to 7.2%

    FEC Proposes Increase in VAT Rate to 7.2%

    In a bid to raise revenues to finance its N10.07 trillion 2020 budget, the Federal Executive Council (FEC) during its meeting yesterday, 11 September 2019, proposed / approved an increase in the nations Value Added Tax (VAT) rate from 5% to 7.2%. The Minister of Finance, Budget and National Planning, Zainab Ahmed, disclosed this while briefing the State House Correspondents after the FEC meeting.

    The increase in VAT rate or any other changes in tax regimes should however not take effect until the enabling law has been amended. The Minister therefore confirmed that work has started on the amendment of the VAT Act to enable the new VAT rate take effect from 2020. While this is on-going, the Federal Government will also carry out extensive consultations with the States and Local Governments, as well as other Public and Private stakeholders in the tax system to ensure robust views on the proposed VAT rate.

    This is coming on the heels of the newly introduced Police Trust Fund Act, which seeks amongst other revenue sources, to levy an annual charge of 0.005% on the net profits of every company operating business in Nigeria. This Act was signed into law by President Buhari on 2 July 2019. The Act did not define whether the ‘net profits’ is before tax or after tax, neither did it prescribe the mechanism for collection of this tax, but it might be expected that it would be administered through the Federal Inland Revenue Service (FIRS) alongside companies income tax and tertiary education tax.

    However with the modus operandi in the Nigerian tax system these days, one would not be surprised to start receiving cold calls/ visits by the Police, just like the Economic and Financial Crimes Commission (EFCC) had been doing in recent times!!! Things may not become this drastic though, considering that the tax amount is not so significant – N50 in every N1million. We will publish a detailed newsletter on this once the modality for administration and payment of this tax is established.

    While the government in its discretion, may choose to devise strategies for increasing government revenues, proper accountability and meaningful use of public funds is urgently required.

    Nigeria’s VAT rate has been termed ‘one of the lowest in the world’ but little attention is paid to Nigeria’s corporate tax rate of 30%, which is categorised alongside the high income tax rates in the world.

    Further, it is common knowledge that the countries which Nigeria might be making reference to as having high VAT rates have an impressive record of keeping to the social contract of providing adequate infrastructure, credits, medicare, education and catering generally to the well being of its citizens with such taxes collected.

    The method of imposing and collecting tax revenues in Nigeria also ought to be reviewed so that several multiple taxes can be unified, tax payments can be made easier, more convenient and more friendly. Tax collecting agencies should also be streamlined to avoid continuous harassment of taxpayers, businesses and investors by different agencies all year round.

    Lastly, inappropriate and very aggressive methods of tax collection such as placing lien on bank accounts before tax liabilities become final and conclusive by law, and imposing taxes on businesses based on the value of the property wherein they carry on business should be reviewed. Proper and legal tax assessment / administration procedures should be followed instead. Where this proves difficult due to the large number of potential taxpayers in Nigeria vis a vis the manpower capacity of the tax agencies, smart Information Technology tools/ platforms can be deployed to make things easier for both the taxpayers and the tax man.

    The consultative approach proposed by the Minister of Finance, Budget and National Planning on the VAT rate increase is a good one, if the method of consultation would be inclusive enough to accommodate majority views of Nigerian tax stakeholders. Seeing that the proposed increase in VAT rate (and the recent Police Trust Fund Levy) are bound to place additional tax payment/ compliance burdens on Nigerian businesses which are already struggling in the face of economic downturn and multiplicity of taxes (and their administrative tediousness), stakeholders are encouraged to loudly add their voices and offer constructive views, opinions and recommendations on how the Nigerian tax system can become more effective.

  • FIRS TO BRING TAX DEBTORS TO BOOK.

    FIRS TO BRING TAX DEBTORS TO BOOK.

    On 19 August 2019, the Federal Inland Revenue Service (FIRS) issued a Public Notice, directed at all tax defaulters whose bank accounts had been placed under lien earlier in the year. A list of 19,901 such tax defaulters was also published by the FIRS. These tax defaulters were defined as entities with an annual turnover of N100 Million and above, that have been collecting Value Added Tax (VAT) as well as deducting Withholding Tax (WHT) without remitting same to the Government. 

    In its 19 August Public Notice, the FIRS called on all companies whose bank accounts were placed under lien but are yet to regularize their tax statuses, to do so within 30 days from 19 August 2019, or have their Principal officers face penalties as stipulated under section 49 (2) (a- d) of the Federal Inland Revenue Service Establishment Act (FIRSEA), without further notice after the 30 days.

    Section 49 (2) of the FIRSEA stipulates that: “Where an offence under this Act is committed by a body corporate or firm or other association of individuals-

    (a) every director, manager, secretary or other similar officer of the body corporate;

    (b) every partner or officer of the firm;

    (c) every person concerned in the management of the affairs of the association; or

    (d) every person who was purporting to act in any capacity, commits an offence and shall be liable to be proceeded against and punished for the offence in like manner as if he had himself committed the offence, unless he proves that the act or omission constituting the offence took place without his knowledge, consent or connivance.”

    Steps to lift lien on an account:

    1. Make payments of applicable taxes for the period(s) in debt.

    2. Visit the closest Substitution Review Unit (SRU): 

    • Fill Taxpayers form as required. Attach evidence of tax payments made, alongside the following: 
    • A letter to the ECFIRS on response to the substitution on your account; Attach to letter:
    • Copy of your last filed return 
    • Copy of current tax clearance certificate 
    • Bank statement for 3 years 
    • Copy of incorporation and commencement of business (Incorporation documents and documents to show when business commenced).

     3. State Sources of income if Loan; or operate Bureau de Change etc. 

    4. SRU team will analyze and give feedback. 

    These details can also be sent to taxpay@firs.gov.ng.

    For help with preparing and submitting the required documentations, please send your detailed needs to clients@vi-m.com.

    To avoid a tax lien and/or other tax issues, the following are advisable: 

    • Once a new business/ Nigerian subsidiary or related entity is registered or incorporated, tax compliance should commence. Both the cost of engaging a good professional tax advisor/ accountant and the tax liabilities will be lower, well planned and properly managed from this stage.
    • Anger at Nigeria’s tax of fiscal system and Government’s lack of significant support for businesses and citizens cannot wipe off tax obligations. Tax is a civic responsibility, and the law.
    • Avoid bribing tax officials or illegally ‘negotiating’ tax payments. One cannot successfully maneuver taxes by bribing tax officials. It will always come back to hunt the taxpayer.
    • The government means business when they say there is no hiding from tax anymore; one can learn this from this episode of tax lien on bank accounts. Some avenues through which the government mines information on tax defaulters include: records of foreign exchange transactions, Corporate Affairs Commission (CAC) records, Bank Verification Number (BVN) records, withholding taxes (WHT) deducted by your customers from your business invoices and paid to the tax authorities, records of landed properties, vehicle registrations etc.
    • There is no tax-free period whatsoever on commencement of business. Taxes apply from commencement of business. Companies Income Tax (CIT) even starts counting right from the date of incorporation.
    • Every business should strive to keep proper and reliable financial records. It helps to facilitate good business decisions, keeps all stakeholders correctly in the know about the state of the business, controls fraud and mismanagement of business resources, is a legal requirement (by the Companies and Allied Matters Act), and will be the organization’s defense in the face of tax issues. The business’ transactions can also be planned for optimum tax effectiveness. 
    • Knowledge of the tax laws is very important. Vi-M has made this extremely handy by compiling the tax laws in a handy and readable app – ‘Tax Law Book’on google play and app store.  
    • For start-up businesses, vi-mtaxassist.com is helping over 1,300 users to compute their monthly taxes – VAT, WHT and PAYE. The web application is FREE TO USE.
    • For growing businesses, Vi-M’s monthly and annual Tax and Accounting Services Coverplans have helped a lot of businesses stay tax compliant as well as have good, credible and up-to-date financial records.
    • For fairly new businesses with backlog of outstanding accounting and tax related tasks, Vi-M’s Post Start-Up Assistplan has also helped a good number of businesses.
    • We are now extending an offer of installment payment of our fees (for up to 6 months) on the Post-Start-Up Assist plan to help growing businesses stagger the cost of compliance/ regularization in a struggling economy. 
    • We are also extending an offer of very discounted fees on tax health check for any business who may require such.
    • Businesses operating a group structure or within a circle of related companies should ensure their Transfer Pricing obligations are fully satisfied. 
    • On-going tax checks and reviews to ensure that your company is fully compliant is key. If one thinks the cost of compliance is high, one should not wait to experience or deal with the cost of remedying non-compliance or paying penalties to the tax authority!
  • Beware of Spam Emails on Tax Lien!

    Beware of Spam Emails on Tax Lien!

    It is no longer news that the Federal Inland Revenue Service (FIRS) had written to banks to place lien on the accounts of tax defaulting entities with an annual turnover of N100 Million and above, particularly those entities that have been collecting Value Added Tax (VAT) as well as deducting Withholding Tax (WHT) without remitting same to the Federal Government. 

    Following last week’s release of the list of 19,001 such currently affected tax defaulters, spammers have taken to sending emails to random recipients to ask for tax documentation using the email excerpt below:

    Subject of email: Tax Lien on Your Company’s Accounts
    Body of email: 
    “A lien will be placed on your company’s bank account(s) if you do not complete your TAX documentation within the next 24 hours.
    Kindly find the attached to enable you complete the process online.

    -Tax Office”

    We would like to use this medium to sensitize all our clients and prospects to be wary of such emails and NOT to open/ click any attachments to it.

    We will send our detailed newsletter shortly on FIRS’ 19 August Public Notice to all tax defaulters under lien; how to avoid a tax lien and how to resolve it (if one is unfortunately already in the situation). 

    Do not hesitate to send an email to clients@vi-m.com if you need further clarifications or help on this.

  • FIRS Issues Public Notice on Applicability of VAT & WHT on Compensations to Distributors, Agents, Others.

    FIRS Issues Public Notice on Applicability of VAT & WHT on Compensations to Distributors, Agents, Others.

    In its Public Notice of 14 August 2019, the Federal Inland Revenue Service (FIRS) has asserted that compensations/ commissions paid to agents, distributors, dealers and retailers by Principal Companies [with particular reference to those in the Fast Moving Consumer Goods (FMCGs) sector] are subject to Value Added Tax (VAT) at 5% (payable in addition to the compensation value) and Withholding Tax (WHT) deduction (by the principal companies).

    In practice, companies in the aforementioned sector (and companies in general who frequently make use of middle men to sell their goods or services) usually give out incentives and compensations to their dealers/ distributors/ retailers/ business partners etc. in the form of commissions, rebates; by cash, credit notes and goods in trade. The FIRS is saying by this Public Notice, that all such compensations, whether in cash or kind, must be quantified and subjected to the requirements of the laws on VAT and WHT.

    For reference, Value Added Tax (VAT) is a tax charged by the supplier of VATable/ taxable goods or service (in this case, the distributors/ retailers/ agents are the suppliers of this service) at 5% of the value of the VATable/ taxable supplies (goods and/ or services).

    Withholding Tax (WHT) on the other hand, is basically an advance payment of income tax which may be used to offset or reduce annual income tax liabilities. It is to be deducted by every taxpayer (who mandatorily becomes an agent of WHT once they are contracting with suppliers/ distributors/ agents/ dealers of goods/ services) at the point of paying or compensating the supplier/ dealer/ distributor/agent as the case may be.

    For further clarifications, agents of WHT include;

    1. Corporate bodies (companies).
    2. Individuals, firms, partnerships and sole traders.
    3. A statutory body, a public authority and other institutions or organizations.
    4. Government Ministry, Department or Agency and Local Government.

    Not all transactions are however subject to WHT. Certain transactions are exempted such as;

    1. Direct purchase across the counter.
    2. Direct purchase of raw materials from supplier as distinct from contract of supplies.
    3. Sale in the ordinary course of business.
    4. All imported goods.
    5. Inter-bank interest.
    6. Income exempted from income tax.
    7. Claims in insurance business.
    8. Interest on bonds.
    9. Dividends redistributed by Holding Companies.

    Rates of WHT for corporate and individuals on transactions are as follows: –

    TRANSACTIONSCOMPANIES (%)INDIVIDUALS (%)
    Royalties105
    Contract of Supplies55
    Contract of Construction55
    Dividend1010
    Technical Service105
    Professional Service105
    Consultancy105
    Management Service105
    Commission105
    Rent1010
    Interest1010
    Hire, Charter, Lease1010
    Directors fees1010

    For help with WHT and VAT compliance issues, please do not hesitate to send us an email via clients@vi-m.com, and we will get to you shortly.

  • National Tax Policy- FEC Approved (2017)

    Image result for nigerian coat of arms logo

    National 

    Tax Policy

    FEDERAL MINISTRY OF FINANCE

    1stFEBRUARY, 2017

    Table of Contents 

    Table of Contents……………………………………………………………………………………………………………………..iii 

    FOREWORD…………………………………………………………………………………………………………………….. iii 

    Chapter One……………………………………………………………………………………………………………………. 1 

    Introduction…………………………………………………………………………………………………………………….. 1 

    1.1     Background…………………………………………………………………………………………………………… 1 

    1.2     Definition of Tax…………………………………………………………………………………………………….. 1 

    1.3     Constitutional Provisions…………………………………………………………………………………………. 1 

    1.4     Challenges of Nigeria Tax System……………………………………………………………………………….. 2 

    1.5     Objectives of the National Tax Policy………………………………………………………………………….. 2 

    Chapter Two……………………………………………………………………………………………………………………. 3 

    Policy Guidelines………………………………………………………………………………………………………………. 3 

    2.1     Guiding Principles of Nigeria Tax System……………………………………………………………………… 3 

    2.2     Taxation as a Tool for Economic Management and Development……………………………………… 3 

    2.2.1  Wealth Creation and Employment………………………………………………………………………….. 4 

    2.2.2  Taxation and Diversification………………………………………………………………………………….. 4 

    2.2.3  Focus on Indirect Taxation……………………………………………………………………………………. 4 

    2.2.4  Convergence of Tax Rates…………………………………………………………………………………….. 4 

    2.2.5  Special Arrangements and Other Incentives……………………………………………………………… 4 

    2.2.6  Creating a Competitive Edge…………………………………………………………………………………. 5 

    2.2.7  International and Regional Treaties………………………………………………………………………… 5 

    Chapter Three………………………………………………………………………………………………………………….. 6 

    Responsibilities of Stakeholders…………………………………………………………………………………………… 6 

    3.1     The Government……………………………………………………………………………………………………. 6 

    3.2     The Taxpayer…………………………………………………………………………………………………………. 6 

    3.3     Revenue Agencies………………………………………………………………………………………………….. 7 

    3.4     Professional Bodies, Tax Practitioners, Consultants and Agents………………………………………… 7 

    3.5     Media and Advocacy Groups…………………………………………………………………………………….. 7 

    Chapter Four……………………………………………………………………………………………………………………. 8 

    Tax Administration……………………………………………………………………………………………………………. 8 

    4.1     Registration of Taxable Persons…………………………………………………………………………………. 8 

    4.2     Tax Compliance……………………………………………………………………………………………………… 8 

    4.3     Efficiency of Administration……………………………………………………………………………………… 9 

    4.4     Technology and Tax Intelligence………………………………………………………………………………. 10 

    4.5     Dispute Resolution……………………………………………………………………………………………….. 10 

    Chapter Five…………………………………………………………………………………………………………………… 11 

    Implementation……………………………………………………………………………………………………………… 11 

    5.1  Implementation Measures……………………………………………………………………………………….. 11 

    5.2     Conclusion………………………………………………………………………………………………………….. 13 

    FOREWORD 

    This administration is committed to diversifying the sources of government revenues by significantly increasing tax to Gross Domestic Product (GDP) ratio, among other things. The attainment of this laudable objective will require an overhaul of our tax policy which is a key function of the Ministry of Finance. Businesses react to tax policy. We are therefore determined to ensure that ours sends the right message to both local and international investors.  

    Despite the existence of National Tax Policy (NTP) since 2012, it would appear that most of the key stakeholders are not sufficiently aware of its provisions resulting in non-implementation. To address this problem, I inaugurated a Committee on the 10thof August, 2016 to review the NTP and recommend workable implementation strategies. 

    The Committee has produced a slim, simple and concise revised policy with clear implementation and monitoring strategies for stakeholders in the Nigeria tax system. We are confident that the revised Policy will eventually give a new lease of life to, and inspire far-reaching reform of, the Nigeria tax system in terms of structure, number of taxes, and administration within the context of our peculiar environment. This Government remains committed to the continuous improvement of our tax system towards the attainment of our objectives. Thus, tax policy review will be a continuous exercise, as a means of evolving with global best practices.  

    Special thanks to the members of the National Tax Policy Review Committee under the Chairmanship of Prof. Abiola Sanni for their steadfastness and commitment to their mandate within a tight schedule. I acknowledge the contributions of other key stakeholders including Mr. Babatunde Fowler, the Executive Chairman of the Federal Inland Revenue Service, resource persons and stakeholders who submitted inputs to the Committee. I also thank the staff of the Federal Ministry of Finance for working assiduously towards the completion of the assignment. 

    Mrs. Kemi Adeosun 

    Honourable Minister of Finance 

    November,  2016 

    Chapter One 

    Introduction 

    1.1     Background 

    The National Tax Policy (NTP) was first published in 2012, as part of the efforts to entrench a robust and efficient tax system in Nigeria. Four years after, the rapidly changing commercial environment and persistent low tax to Gross Domestic Product (GDP) ratio among other developments, demand new strategies to continue to meet government objectives of creating an enabling environment, simplifying the tax system and ensuring ease of compliance. It has become imperative to review and update the NTP.  

    1.2     Definition of Tax 

    For the purpose of this Policy, “tax” is any compulsory payment to government imposed by law without direct benefit or return of value or a service whether it is called a tax or not. 

    1.3     Constitutional Provisions 

    Chapter 2 of the Constitution of the Federal Republic of Nigeria 1999 contains Fundamental Objectives and Directive Principles of State Policy which are relevant to the NTP. In this regard, appropriate tax laws, administrative processes and procedure should be made to advance the Constitutional provisions. Therefore, tax policies, laws and administration shall promote the attainment of the following: 

    1. the ability of all taxable persons to declare their income honestly to appropriate and lawful agencies and pay their tax promptly; 
    2. residence rights of Nigerians, free mobility of people, goods and services throughout the federation; 
    3. promoting fiscal responsibility and accountability that reflects the principle of fiscal federalism; 
    4. ensuring that the rights of all taxable persons are recognized and protected; 
    5. eradicating corrupt practices and abuse of authority in the tax system; 
    6. ensuring that the resources of the nation promote national prosperity and self-reliant economy; 
    7. securing maximum welfare, justice and equity; 
    8. ensuring that the resources of the nation are harnessed and distributed to serve the common good; 
    9. promoting and protecting Nigeria’s national interest; 
    10. promoting African integration, international co-operation and eliminating discrimination; and 
    11. respecting international law and treaty obligations. 

    1.4     Challenges of Nigeria Tax System 

    Despite the potentials of taxation as a dynamic tool for sustainable national development, Nigeria tax system has been unable to achieve its objectives due to the following challenges, among others: 

    • lack of robust framework for the taxation of informal sector and high network individuals, thus limiting the revenue base and creating inequity; 
    • fragmented database of taxpayers and weak structure for exchange of information by and with tax authorities, resulting in revenue leakage; 
    • inordinate drive by all tiers of government  to grow internally generated revenue which has led to the arbitrary exercise of regulatory powers for revenue purpose; 
    • lack of clarity on taxation powers of each level of government and encroachment on the powers of one level of government by another; 
    • insufficient information available to taxpayers on tax compliance requirements thus creating uncertainty and non-compliance; 
    • poor accountability for tax revenue; 
    • insufficient capacity which has led to the delegation of powers of revenue officials to third parties, thereby creating complications in the tax system; 
    • use of aggressive and unorthodox methods for tax collection; 
    • failure by tax authorities to honour refund obligations to taxpayers; 
    • the non-regular review of tax legislation, which has led to obsolete laws, that do not reflect current economic realities; and 
    • lack of strict adherence to tax policy direction and procedural guidelines for the operation of the various tax authorities. 

    1.5     Objectives of the National Tax Policy 

    The National Tax Policy provides the fundamental guidelines for the orderly development of the Nigeria tax system. The Policy is expected to achieve the following specific objectives, among others; 

    • guide the operation and review of the tax system; 
    • provide the basis for future tax legislation and administration; 
    • serve as a point of reference for all stakeholders on taxation; 
    • provide benchmark on which stakeholders shall be held accountable; and 
    • provide clarity on the roles and responsibilities of Stakeholders in the tax System. 

    Chapter Two 

    Policy Guidelines 

    Tax Policy provides a framework for a sustainable system that would ensure reliable sources of revenue to government and support the economic development of the nation. 

    2.1     Guiding Principles of Nigeria Tax System 

    All existing and future taxes are expected to align with the following fundamental features: 

    Equity and Fairness:Nigeria tax system should be fair and equitable devoid of discrimination. Taxpayers should be required to pay according to their ability. 

    Simplicity, Certainty and Clarity:Tax laws and administrative processes should be simple, clear and easy to understand. 

    Convenience: The time and manner for the fulfilment of tax obligations shall take into account the convenience of taxpayers and avoid undue difficulties. 

    Low Compliance Cost:The financial and economic cost of compliance to the taxpayer should be kept to the barest minimum. 

    Low Cost of Administration:Tax Administration in Nigeria should be efficient and cost-effective in line with international best practices. 

    Flexibility:Taxation should be flexible and dynamic to respond to changing circumstances in the economy in a manner that does not retard economic activities. 

    Sustainability:The tax system should promote sustainable revenue, economic growth and development. There should be a synergy between tax policies and other economic policies of government. 

    2.2     Taxation as a Tool for Economic Management and Development 

    The tax system should support sustainable growth and development at all times.  In this regard, the tax system should be geared towards meeting the following goals: 

    2.2.1    Wealth Creation and Employment 

    The tax system should be designed to promote social, political and economic development. Accordingly, 

    1. tax policies shall promote employment, export and local production; 
    2. tax policies and laws shall not be retroactive; 
    3. tax policies and laws should ensure equal investment opportunities and support for businesses whether local or foreign; 
    4. tax policies and laws on investments should be long term focused and tenured to enable investors plan with reasonable certainty; 
    5. any incentive to be granted should be broad, sector based, tenured and transparent. Implementation should be properly monitored, evaluated, periodically reported and kept under review; 
    6. revenue forgone from tax incentives or concessions should be quantified against expected benefits and reported annually. Where the benefits cannot be quantified, qualitative factors must be considered; and 
    7. tax policies on investments should not promote monopoly such as entry barriers or otherwise prevent competition. 

    2.2.2    Taxation and Diversification 

    There should be concerted efforts to attract investments in all sectors of the economy, with more focus on promoting investment in specific sectors as may be identified by government in the overall interest of the country from time to time. This will boost the revenue base for optimum revenue generation. 

    2.2.3    Focus on Indirect Taxation 

    The tax system should focus more on indirect taxes which are easier to collect and administer and more difficult to evade. 

    Tax rates should be progressive and should be designed to promote equality. The tax system should gradually seek a convergence of personal income tax and capital gain tax rates with corporate income tax rates to reduce opportunities for tax avoidance. 

    2.2.4     Convergence of Tax Rates 

     Tax rates should be progressive and should be designed to promote equality. The tax system should gradually seek a convergence of the highest marginal rate of personal income tax, capital gains tax rates and the general companies income tax rates to reduce opportunities for tax avoidance. 

    2.2.5    Special Arrangements and Other Incentives 

    Special arrangements should be sector based and not directed at entities or persons. Also, special arrangements such as free zones and other tax incentives or waivers should not be arbitrarily terminated except as provided in the enabling legal framework or treaties at the time of creation.  

    Government may provide tax incentives to specific sectors or for such specific activities in order to stimulate or retain investment in the sector. 

    The process of granting and renewing incentives, waivers and concessions shall be transparent and comply strictly with legislative provisions and international treaties. 

    2.2.6    Creating a Competitive Edge 

    1. Reduction in the Number of Taxes 

    Taxes should be few in number, broad-based and high revenue-yielding. The administration of the taxes should also be simplified for ease of enforcement and compliance. 

    1. Avoidance of Multiple Taxation 

    Taxes similar to those being collected by a level of Government should not be introduced by the same or another level of Government. The Federal, State and Local Governments shall ensure collaboration in harmonizing and eliminating multiple taxation. 

    2.2.7    International and Regional Treaties 

    A wide network of International and Regional treaties would be beneficial to the economy. In this regard, Nigeria shall continue to expand its treaty network in the best interest of the Nigerian   State.  Generally, treaties   should   prevent  double   taxation   without  creating opportunities for nontaxation. 

    Existing treaties should be reviewed regularly and where necessary renegotiated in line with international best practices. New treaties should consider benefits to Nigeria both in the short, medium but more importantly long term. 

    Nigeria’s model double tax treaty should be regularly reviewed to adequately cater for the best interests of the country. Appropriate measures shall be taken to ensure that all treaties duly signed and ratified are implemented. 

    Chapter Three 

    Responsibilities of Stakeholders 

    For an orderly and sustainable development of the Nigeria tax system, the Federal and State Ministries of Finance shall have the primary responsibility for tax policy matters, including initiating proposals for amendments to tax Laws.  Ministries of Finance shall collaborate with relevant Stakeholders in carrying out their tax policy responsibilities. The key stakeholders in the Nigeria tax system can be broadly categorised as follows: 

    3.1     The Government 

    All levels and arms of Government, Ministries, Extra-Ministerial Departments and Agencies where applicable shall: 

    1. implement and regularly review tax policies and laws; 
    2. provide information on all revenue collected on a quarterly basis; 
    3. ensure adequate funding, administrative and operational autonomy of tax authorities; and iv.ensure a reasonable transition period of between three and six months before implementation of a new tax. 

    3.2     The Taxpayer 

    A taxpayer is a person, group of persons or an entity that pays or is liable to tax. The taxpayer is the most critical stakeholder and primary focus of the tax system. The taxpayer shall consider tax responsibilities as a civic obligation and constant duty that must be discharged as and when due. The taxpayer shall be entitled to: 

    1. relevant information for the discharge of tax obligations; 
    2. receive prompt, courteous and professional assistance in dealing with tax authorities; 
    3. raise objections to decisions and assessments and receive response within a reasonable time; iv.           a fair and impartial appeal; and 

    v.self-representation or by any agent of choice, provided an agent acting for financial reward shall be an accredited tax practitioner. 

    3.3     Revenue Agencies 

    Any agencies responsible for the collection and administration of revenue shall: 

    1. treat the taxpayer as a customer; 
    2. ensure efficient implementation of tax policies, laws and international treaties; 
    3. facilitate inter-agency co-operation and exchange of information; iv.    undertake timely audits and investigations;  
    4. undertake tax awareness and taxpayers’ education, and 
    5. establish a robust process to prevent, detect and punish corrupt tax officials 

    3.4     Professional Bodies, Tax Practitioners, Consultants and Agents 

    They shall: 

    1. act in accordance with professional code of conduct and ethics; 
    2. not aid and abet tax evasion and corrupt practices, and
    3. actively promote effective tax compliance. 

    3.5     Media and Advocacy Groups 

    They shall: 

    1. promote tax education and awareness; 
    2. articulate, protect and advance taxpayers right; 
    3. advance accountability and transparency in the utilization of tax revenue; iv.ensure accurate, objective and balanced reporting in accordance with their professional code of conduct and ethics; and

    v.      ensure that aspiring political office holders clearly understand the Tax Policy and the Nigerian tax system and are able to articulate their plans for the tax system to which they will be held accountable. 

    Chapter Four 

    Tax Administration 

    Tax administration in Nigeria cuts across the three-tiers of Government. This tax policy document establishes clear guidelines on crucial tax administration issues. 

    In the context of the Nigerian Tax Policy, tax authorities at all levels shall administer their mandates in accordance with the following:

    4.1     Registration of Taxable Persons 

    All taxable persons shall be registered and issued with Taxpayer Identification Number (TIN) applicable nationwide. Tax authorities should leverage on the database of the Central Bank of Nigeria on Bank Verification Number (BVN), National Identity  Management   Commission (NIMC), Nigeria   Communication   Commission (NCC), Corporate Affairs Commission (CAC), Federal Road Safety Commission (FRSC), Nigeria Immigration   Service (NIS) and   other  relevant   sources.   The  current   uncoordinated registration by different agencies should be harmonised. 

    4.2     Tax Compliance 

    Government shall apply all available resources and tools at their disposal to ensure that taxpayers voluntarily comply with their tax obligations. In order to improve voluntary compliance, the relevant authorities should ensure: 

    1. that the option for self-assessment is in place, and the process and procedures are simple; 
    2. development of frameworks for tax amnesty in order to expand the tax net; 
    3. focus on taxpayers’ services, iv.            constant tax education and enlightenment;  
    4. the overall performance of the tax system is measured and reported periodically, and 
    5. the establishment of a system to recognize and honour compliant taxpayers. 

    4.3     Efficiency of Administration 

    Payment Processing and Collection 

    Collection system shall leverage on modern technology towards advancing ease of payment and prevention of revenue losses. 

    Record Keeping 

    Tax authorities shall partner with the relevant agencies to setup automated systems and adequately train tax officials in the use and maintenance of such systems.  Electronic systems of record keeping   in line with   global   best  practices   should   be entrenched   to enhance  the   tax administration process. 

    Exchange of Information 

    Tax authorities shall develop an efficient framework for cooperation and sharing of information with other tax authorities and relevant local and international agencies. This will mitigate tax evasion and revenue losses. 

    Enforcement of Tax Laws 

    Tax authorities shall ensure the enforcement of civil and criminal sanctions as provided under the various tax laws. 

    Funding of Tax Authorities 

    Government shall provide adequate funding for tax authorities. Accordingly, Government should ensure that an adequate percentage of revenue collected should be provided to the authority for its operations. Funding for Tax Refunds 

    Government shall provide adequate funding to meet refund obligations. Tax authorities shall ensure timely and efficient payment of refunds. 

    Ease of Paying Taxes 

    Tax authorities shall ensure that payment procedures and documentation are convenient and cost effective. Tax authorities shall work towards ensuring accelerated improvement on the global index of ease of paying taxes. 

    Revenue Autonomy 

    Governments shall ensure a reasonable level of financial and administrative autonomy for their respective tax authorities to facilitate effective discharge of their duties. 

    4.4     Technology and Tax Intelligence 

    Tax authorities shall ensure: 

    1. deployment of technology to aid all aspects of tax administration; 
    2. the integrity and regular update of the database; and 
    3. a workable and secure structure for intelligence and information gathering. 

    4.5     Dispute Resolution 

    In the event of any dispute, the tax authority and relevant stakeholders shall leverage on all amicable means of dispute resolution including arbitration and only resort to judicial determination as a last resort.

    Chapter Five 

    Implementation 

    The effective implementation of the National Tax Policy is crucial for Nigeria to attain the set goals. The Federal Ministry of Finance has a pivotal role to play in the development and implementation of the Tax Policy. Accordingly, the Ministry shall take appropriate steps to ensure effective implementation of the following. 

    5.1       Implementation Measures 

    The President and Governors 

    1. The President and Governors shall ensure that Budget Speeches and presentations for the fiscal year consistently contain the overriding fiscal policies and summary statements of the expected tax revenue. This will give key stakeholders a sense of what government plans to do and enable them to plan accordingly. 
    2. The President and Governors should work towards ensuring that there is only one revenue agency per level of government. This would streamline revenue administration and improve efficiency of revenue collection. Ministries, Extra-Ministerial Departments and Agencies other than tax authorities should not become tax collecting bodies. 
    3. The Executive shall sponsor a bill for the establishment of a tax court as an independent body to adjudicate in tax matters. 

    Legislature 

    1. The consideration and passage of tax bills have not fared well within the existing Finance Committee of the National and State Houses of Assembly. The National and State Houses of Assembly are encouraged to establish a Taxation Committee to focus on tax matters and collaborate with the Tax Policy Implementation Committee. 
    2. There shall be an Establishment Act for the Joint Tax Board towards strengthening and repositioning it to contribute meaningfully to the development of the Nigeria tax system through broader mandate beyond its current advisory role. 
    3. The qualification for the lower income tax rate applicable to small businesses should be reviewed in line with current economic realities. The income tax rate for small businesses should be further reduced as an incentive to encourage compliance and promote Micro, Small and Medium Enterprises (MSMEs). 
    4. There should be a minimum threshold for VAT registration and compliance in order to protect micro-businesses. 

    Ministry of Finance 

    viii.The Minister of Finance shall set in motion machinery for tax reform. Taxation is a dynamic tool. Having reviewed the policy, the tax law and administration cannot remain stagnant. It is imperative to streamline existing and future tax laws for an orderly development. ix.The Minister of Finance shall establish a Tax Policy Implementation Committee to monitor compliance, regularly review the Policy and make appropriate recommendations. 

    x.The Minister of Finance/Commissioners of Finance shall ensure automation of collection and remittance processes of taxes by all Ministries, Extra-Ministerial Departments and Agencies. xi.The Ministry of Finance shall work with the Legislature to ensure that the requisite changes to tax laws are enacted together with the Appropriation Act of the same year. This would require the executive to timely present tax laws as executive bill for the timely consideration of the National and State House of assemblies. 

    • Ministry of Finance shall establish an Office of Tax Simplification which shall be responsible for ensuring continuous improvement to tax legislation and administration. 
    • Ministry of Finance shall create a dedicated tax policy website. Apart from sensitizing the general public on the provisions of the Tax Policy, such a platform would facilitate feedback from stakeholders on the existing and future policy proposals. 
    • The Minister of Finance shall give periodic reports to the National Economic Council (NEC) on tax policy implementation agenda. Apart from updating NEC, such obligation will ensure that the Ministry of Finance is up to speed in its implementation agenda. 
    • Ministry of Finance shall ensure that tax authorities develop Key Performance Indices for Nigeria to attain a top 50 position on the global index of ease of paying taxes by 2020 and consistently improve on the ranking. 

    Ministries, Departments and Agencies (MDAs) 

    xvi.Head of MDAs shall give periodic report(s) to the Ministry of Finance on the level of implementation of the National Tax Policy. Apart from sensitizing the MDAs to the provisions of the Tax Policy, such reports would afford the Ministry of Finance the opportunity to determine the level of compliance and devise appropriate responses as may be necessary to improve implementation. 

    Tax Authorities 

    xvii. To promote tax awareness and a tax culture in Nigeria, the Federal and State tax authorities through the Joint Tax Board shall set aside a uniform day in the year as a National Tax Day.  Also, Government should make concerted efforts to ensure that taxation is taught at all levels of education. xviii.Tax authorities shall establish administrative framework for amnesty and whistle blowing as part of the strategies for curbing evasion and widening the tax net. 

    xix.Federal and State Tax authorities should respond promptly to the changing business environment as it affects tax administration and develop a workable framework to meet the taxpayer demands in this respect. 

    Independent National Electoral Commission (INEC) 

    xx.The Independent National Electoral Commission (INEC) shall by necessary Regulation and Rules mandate political parties to articulate, prepare, provide and make public their tax agenda before and during election campaigns.  This will make political parties reflect more deeply in an organized fashion on the financial implications of their promises and the options of financing them. This would also help the taxpayer know the preferences of each party on tax matters and take informed decision. 

    5.2     Conclusion 

    The main thrust of the Tax Policy is to establish fundamental principles to guide an orderly development of the Nigeria tax system towards meeting its overall objectives. In this regard, the Policy highlights the Fundamental Objectives contained in Chapter 2 of the 1999 Constitution of the Federal Republic of Nigeria and reinforces the need for tax laws and administrative practices to promote economic development. The Policy highlights the challenges confronting the Nigeria tax system and key policy principles to address them. It recognises the roles played by key stakeholders in the development of an effective tax system, and clearly states their rights and duties. The Policy also highlights the need for effective Tax Administration through the development of mandates which relevant Tax Authorities should seek to achieve in their pursuit of an effective and efficient tax system. 

    Finally, the Policy reinforces the role of the Ministry of Finance in the formulation, coordination and most importantly monitoring the implementation of the tax policy on an ongoing basis. It recognises the need for a holistic review of the various components of the Tax System [Laws and Administration]. It requires all stakeholders to be fully committed to playing their parts towards achieving the set objectives. 

  • NIGERIA – BELGIUM DTA INCOME TAX TREATY

    AGREEMENT BETWEEN
    THE GOVERNMENT OF THE KINGDOM OF BELGIUM
    AND THE GOVERNMENT OF THE FEDERAL REPUBLIC OF NIGERIA FOR THE AVOIDANCE OF DOUBLE TAXATION AND THE PREVENTION OF FISCAL EVASION WITH RESPECT
    TO TAXES ON INCOME AND CAPITAL GAINS

    Article 1
    Personal Scope
    This Agreement shall apply to persons who are residents of one or both of the

    Contracting States.

    Article 2 Taxes Covered

    1. The taxes to which this Agreement shall apply are:

    (a) in Nigeria:
    (i) the personal income tax;
    (ii) the companies income tax; (iii) the petroleum profits tax; and (iv) the capital gains tax

    (hereinafter referred to as “Nigerian tax”);

    (b) in Belgium:
    (i) the individual income tax (impôt des personnes physiques – personenbelasting); (ii) the corporate income tax (impôt des sociétés – vennootschapsbelasting);
    (iii) the income tax on legal entities (impôt des personnes morales – rechtspersonenbelasting);
    (iv) the income tax on non-residents (impôt des non-résidents – belasting der niet- verblijfhouders);
    (v) the special levy assimilated to the individual income tax (cotisation spéciale assimilée à l’impôt des personnes physiques – met de personenbelasting gelijkgestelde bijzondere heffing),

    including the prepayments, the surcharges on these taxes and prepayments, and the supplements to the individual income tax
    (hereinafter referred to as “Belgian tax”).

    NIGERIA DTA

    Page 2 of 185

    2. This Agreement shall also apply to any identical or substantially similar taxes which are imposed by either Contracting State after the date of signature of this Agreement in addition to, or in place of, the existing taxes. The competent authorities of the Contracting States shall notify each other of any significant changes which have been made in their respective taxation laws.

    3. This Agreement shall not apply, in the case of Belgium, to the corporate income tax to the extent that such tax is payable, in accordance with Belgian law, by a company which is a resident of Belgium in the event of the repurchase by that company of its own shares or in the event of the distribution of its assets.

    Article 3 General Definitions

    1. In this Agreement, unless the context otherwise requires:

    (a) the term “Nigeria” means the Federal Republic of Nigeria including any area outside the territorial waters of the Federal Republic of Nigeria which in accordance with international law has been or may hereafter be designated, under the laws of the Federal Republic of Nigeria concerning the continental shelf, as an area within which the rights of the Federal Republic of Nigeria with respect to the seabed and subsoil and their natural resources may be exercised;

    (b) the term “Belgium” means the Kingdom of Belgium; when used in a geographical sense, it means the national territory and any area beyond the territorial sea of Belgium within which under Belgian law and in accordance with international law Belgium exercises sovereign rights or its jurisdiction;

    (c) the term “national” means”:
    (i) in relation to Nigeria, any citizen of Nigeria and any legal person, partnership, association or other entity deriving its status as such from the law in force in Nigeria;
    (ii) in relation to Belgium, any individual possessing the Belgian nationality and any legal person, partnership or association deriving its status as such from the laws in force in Belgium;

    (d) the terms “a Contracting State” and “the other Contracting State” mean Nigeria or Belgium as the context requires;
    (e) the term “person” means an individual, a company or any other body of persons;

    (f) the term “company” means any body corporate or any entity which is treated as a body corporate for tax purposes under the respective laws of each Contracting State;
    (g) the terms “enterprise of a Contracting State” and “enterprise of the other Contracting State” mean respectively an enterprise carried on by a resident of a Contracting State and an enterprise carried on by a resident of the other Contracting State;

    NIGERIA DTA

    Page 3 of 185

    (h) the term “international traffic” means any transport by a ship or aircraft operated by an enterprise of a Contracting State, except when the ship or aircraft is operated solely between places in the other Contracting State;
    (i) the term “competent authority” means:

    (i) in the case of Nigeria, the Minister of Finance or his authorised representative;
    (ii) in the case of Belgium, the Minister of Finance or his authorised representative.

    2. As regards the application of this Agreement by a Contracting State any term not defined therein shall, unless the context otherwise requires, have the meaning which it has under the law of that State concerning the taxes to which the Agreement applies.

    Article 4
    Resident
    1. For the purposes of this Agreement, the term “resident of a Contracting State” means any person who, under the laws of that State, is liable to tax therein by reason of his domicile, residence, place of management or incorporation or any other criterion of

    a similar nature.

    2. Where by reason of the provisions of paragraph 1 of this Article, an individual is a resident of both Contracting States, then his status shall be determined in accordance with the following rules:

    (a) he shall be deemed to be a resident of the State in which he has a permanent home available to him; if he has a permanent home available to him in both States, he shall be deemed to be a resident of the State with which his personal and economic relations are closer (centre of vital interests);

    (b) if the State in which he has his centre of vital interests cannot be determined, or if he has not a permanent home available to him in either State, he shall be deemed to be a resident of the State in which he has an habitual abode;
    (c) if he has an habitual abode in both States or in neither of them, he shall be deemed to be a resident of the State of which he is a national;

    (d) if he is a national of both States or of neither of them, the competent authorities of the Contracting States shall settle the question by mutual agreement.

    3.Where by reason of the provisions of paragraph 1 of this Article a person other than an individual is a resident of both Contracting States, then the competent authorities shall endeavour to resolve the case by mutual agreement, due regard being had to its place of effective management or incorporation or to any other relevant criterion.

    NIGERIA DTA

    Page 4 of 185

    Article 5
    Permanent Establishment
    1.For the purposes of this Agreement, the term “permanent establishment” means a fixed place of business through which the business of an enterprise is wholly or partly

    carried on.
    2.The term “permanent establishment” includes especially:

    (a) a place of management; (b) a branch;
    (c) an office;
    (d) a factory;

    (e) a workshop;
    (f) a mine, an oil or gas well, a quarry or any other place of extraction of natural resources;
    (g) a building site or construction or assembly project which exists for more than three months;
    (h) the provision of supervisory activities for more than three months on a building site or construction or assembly project;
    (i) the installation, or the provision of supervisory activities in connection with such installation, incidental to the sale of machinery or equipment where the charge payable for such installation exceeds 10% of the sale price of the machinery or equipment free-on-board.

    3.Notwithstanding the preceding provisions of this Article, the term “permanent establishment” shall not be deemed to include:

    (a) the use of facilities solely for the purpose of storage, display or delivery of goods or merchandise belonging to the enterprise;
    (b) the maintenance of a stock of goods or merchandise belonging to the enterprise solely for the purpose of storage, display or delivery;

    (c) the maintenance of a stock of goods or merchandise belonging to the enterprise solely for the purpose of processing by another enterprise;
    (d) the maintenance of a fixed place of business solely for the purpose of purchasing goods or merchandise or of collecting information, for the enterprise; (e) the maintenance of a fixed place of business solely for the purpose of carrying on, for the enterprise, any other activity of a preparatory or auxiliary character.

    4.The term “permanent establishment” shall include a fixed place of business used as a sales outlet notwithstanding the fact that such fixed place of business is otherwise maintained solely for any of the activities mentioned in paragraph 3 of this Article.

    NIGERIA DTA

    Page 5 of 185

    5.An enterprise of a Contracting State shall not be deemed to have a permanent establishment in the other Contracting State merely because it carries on business in that other State through a broker, general commission agent or any other agent of an independent status, where such persons are acting in the ordinary course of their business.

    6.A person (other than an agent of an independent status to whom the provisions of paragraph 5 of this Article apply) who acts in a Contracting State on behalf of an enterprise of the other Contracting State shall be deemed to be a permanent establishment of that enterprise in the first-mentioned Contracting State if:

    (a) he has, and habitually exercises in that State, an authority to conclude contracts or carries on any business activities on behalf of the enterprise, unless his activities are limited to those mentioned in paragraph 3 of this Article; or
    (b) he habitually secures orders for the sale of goods or merchandise in the first- mentioned State exclusively or almost exclusively on behalf of the enterprise or other enterprises controlled by it or which have a controlling interest in it.

    Article 6
    Income From Immovable Property
    1.Income from immovable property including income from agriculture or forestry may

    be taxed in the Contracting State in which such property is situated.

    2.The term “immovable property” shall have the meaning which it has under the law of the Contracting State in which the property in question is situated. The term shall in any case include property accessory to immovable property, live-stock and equipment used in agriculture and forestry, rights to which the provisions of the general law respecting landed property apply, usufruct of immovable property and rights to variable or fixed payments as consideration for the working of, or the right to work, mineral deposits, sources and other natural resources. Ships and aircraft shall not be regarded as immovable property.

    3.The provisions of paragraph 1 of this Article shall apply to income derived from the direct use, letting or use in any other form of immovable property.

    4.The provisions of paragraphs 1 and 3 of this Article shall also apply to income from immovable property of an enterprise and to income from immovable property used for the performance of independent personal services.

    Article 7
    Business profits
    1.The profits of an enterprise of a Contracting State shall be taxable only in that State unless the enterprise carries on business in the other Contracting State through a permanent establishment situated therein. If the enterprise carries on business as

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    aforesaid, the profits of the enterprise may be taxed in the other State but only so much of them as is attributable to:

    (a) that permanent establishment;
    (b) sales in that other State of goods or merchandise of the same or similar kind as those sold through that permanent establishment; or
    (c) other business activities carried on in that other State of the same or similar kind as those effected through that permanent establishment.

    2.Subject to the provisions of paragraph 3 of this Article, where an enterprise of a Contracting State carries on business in the other Contracting State through a permanent establishment situated therein, there shall in each Contracting State be attributed to that permanent establishment the profits which it might be expected to make if it were a distinct and separate enterprise engaged in the same or similar activities under the same or similar conditions and dealing wholly independently with the enterprise of which it is a permanent establishment.

    3.In the determination of the profits of a permanent establishment, there shall be allowed as deductions expenses shown to have been incurred for the purposes of the business of the permanent establishment, including executive and general administrative expenses so incurred, whether in the State in which the permanent establishment is situated or elsewhere.

    However, no such deduction shall be allowed in respect of amounts, if any, paid (otherwise than towards reimbursement of actual expenses) by the permanent establishment to the head office of the enterprise or any of its other offices, by way of royalties, fees or other similar payments in return for the use of patents or other rights, or by way of commission, for specific services performed or for management, or by way of interest on moneys lent to the permanent establishment. Likewise, no account shall be taken, in the determination of the profits of a permanent establishment, for amounts charged (otherwise than towards reimbursement of actual expenses) by the permanent establishment to the head office of the enterprise or any of its other offices, by way of royalties, fees or other similar payments in return for the use of patents or other rights, or by way of commission for specific services performed or for management, or by way of interest on moneys lent to the head office of the enterprise or any of its other offices.

    For the purpose of this paragraph, interest payable to a banking enterprise by its permanent establishment or vice versa shall be allowed as a deduction to the extent that it represents a reimbursement of actual expenses.

    4.No profits shall be attributed to a permanent establishment by reason of the mere purchase by that permanent establishment of goods or merchandise for the enterprise. Provided that where that permanent establishment is also used as a sales outlet for the

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    goods or merchandise so purchased, the profits on such sales may be attributed to that permanent establishment.

    5.Where profits include items of income which are dealt with separately in other Articles of this Agreement, then the provisions of those Articles shall not be affected by the provisions of this Article.

    Article 8
    Shipping and Air Transport
    1.A resident of a Contracting State shall be exempt from tax in the other Contracting State in respect of profits or gains derived from the operation of ships or aircraft in

    international traffic.

    2.However, no exemption shall be granted if such operation in international traffic is carried on by a resident of only one of the Contracting States. In such a case, the tax charged shall not exceed 1% of the earnings of the resident derived from the other Contracting State.

    For the purpose of this paragraph, the term “earnings” means income from freight, mails and sale of tickets and other such income less refunds and payments of wages and salaries of ground staff.

    3.Notwithstanding the provisions of paragraph 2 of this Article, the provisions of paragraph 1 of this Article shall also apply to profits derived from the participation in a pool, a joint business or an international operating agency in which residents of both Contracting States take part.

    Article 9 Associated Enterprises

    1.Where

    (a) an enterprise of a Contracting State participates directly or indirectly in the management, control or capital of an enterprise of the other Contracting State, or (b) the same persons participate directly or indirectly in the management, control or capital of an enterprise of a Contracting State and an enterprise of the other Contracting State,

    and in either case conditions are made or imposed between the two enterprises in their commercial or financial relations which differ from those which would be made between independent enterprises, then any profits which would, but for those conditions, have accrued to one of the enterprises, but, by reason of those conditions, have not so accrued, may be included in the profits of that enterprise and taxed accordingly.

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    2.Where a Contracting State includes in the profits of an enterprise of that State – and taxes accordingly – profits on which an enterprise of the other Contracting State has been charged to tax in that other State and the profits so included are profits which would have accrued to the enterprise of the first-mentioned State if the conditions made between the two enterprises had been those which would have been made between independent enterprises, then that other State shall make such adjustment as it considers appropriate to the amount of the tax charged therein on those profits. In determining such adjustment, due regard shall be had to the other provisions of this Agreement and the competent authorities of the Contracting States shall if necessary consult each other.

    Article 10
    Dividends
    1.Dividends derived from a company which is a resident of a Contracting State by a

    resident of the other Contracting State may be taxed in that other State.

    2.However, such dividends may also be taxed in the Contracting State of which the company paying the dividends is a resident and according to the laws of that State, but if the beneficial owner of the dividends is a resident of the other Contracting State, the tax so charged shall not exceed:

    (a) 12.5% of the gross amount of the dividends if the recipient is a company which controls directly or indirectly at least 10% of the voting power in the company paying the dividends;
    (b) 15% of the gross amount of the dividends in all other cases.

    This paragraph shall not affect the taxation of the company in respect of the profits out of which the dividends are paid.

    This paragraph shall not affect the taxation of the company in respect of the profits out of which the dividends are paid.

    3.The provisions of paragraphs 1 and 2 of this Article shall not apply where the beneficial owner of the dividends, being a resident of a Contracting State, has in the other Contracting State a permanent establishment or performs in that other State independent personal services from a fixed base situated therein and the holding by virtue of which the dividends are paid is effectively connected with the business carried on through such permanent establishment or fixed base. In such a case, the provisions of Article 7 or Article 14, as the case may be, shall apply.

    4.Where a company which is a resident of a Contracting State derives profits or income from the other Contracting State, that other State may not impose any tax on the dividends paid by the company to a resident of the first-mentioned State except insofar as the holding in respect of which the dividends are paid is effectively connected with a permanent establishment or a fixed base situated in that other State nor subject the

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    company’s undistributed profits to a tax on undistributed profits, even if the dividends paid or the undistributed profits consist wholly or partly of profits or income arising in that other State.

    5.The provisions of this Article shall not apply if the right giving rise to the dividends was created or assigned mainly for the purpose of taking advantage of this Article and not for bona fide commercial reasons.

    6.The term “dividends” as used in this Article means income from shares, or other rights, not being debt-claims, participating in profits, as well as income from other corporate rights which is subjected to the same taxation treatment as income from shares by the taxation law of the State of which the company making the distribution is a resident, and also any other item (other than interest relieved from tax under the provisions of Article 11 of this Agreement) which, under the law of the Contracting State of which the company paying the dividends is a resident, is treated as a dividend or distribution of a company. In the case of Belgium the term also means income which is taxable under the head of income on capital invested by the members of a company other than a company with share capital, which is a resident of Belgium.

    Article 11
    Interest
    1.Interest derived from a Contracting State by a resident of the other Contracting State

    may be taxed in that other State.

    2.However, such interest may also be taxed in the Contracting State in which it arises, and according to the laws of that State, but if the beneficial owner of the interest is a resident of the other Contracting State, the tax so charged shall not exceed 12.5% of the gross amount of the interest.

    3.The provisions of paragraphs 1 and 2 of this Article shall not apply if the beneficial owner of the interest, being a resident of a Contracting State, carries on business in the other Contracting State in which the interest arises, through a permanent establishment situated therein, or performs in that other State independent personal services from a fixed base situated therein, and the debt-claim in respect of which the interest is paid is effectively connected with such permanent establishment or fixed base. In such a case, the provisions of Article 7 or Article 14, as the case may be, shall apply.

    4.Interest shall be deemed to arise in a Contracting State where the payer is that State itself, a political subdivision, a local authority or a resident of that State. Where, however, the person paying the interest, whether he is a resident of a Contracting State or not, has in a Contracting State a permanent establishment or a fixed base in

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    connection with which the indebtedness on which the interest is paid was incurred, and such interest is borne by such permanent establishment of fixed base, then such interest shall be deemed to arise in the State in which the permanent establishment or fixed base is situated.

    5.Where owing to a special relationship between the payer and the beneficial owner or between both of them and some other person, the amount of the interest exceeds, for whatever reason, the amount which would have been agreed upon in the absence of such relationship, the provisions of this Article shall apply only to the last-mentioned amount. In that case, the excess part of the payments shall remain taxable according to the laws of each Contracting State, due regard being had to the other provisions of this Agreement.

    6.The provisions of this Article shall not apply if the right or property giving rise to the interest was created or assigned mainly for the purpose of taking advantage of this Article and not for bona fide commercial reasons.

    7.The term “interest” as used in this Article means income from debt-claims of every kind, whether or not secured by mortgage and whether or not carrying a right to participate in the debtor’s profits, and in particular, income from government securities and income from bonds or debentures, including premiums and prizes attaching to such securities, bonds or debentures. However, the term “interest” does not include for the purpose of this Article income dealt with in paragraph 6 of Article 10.

    Article 12

    Royalties

    1.Royalties derived from a Contracting State by a resident of the other Contracting State may be taxed in that other State.

    2.However, such royalties may also be taxed in the Contracting State from which they are derived and according to the laws of that State, but if the beneficial owner of the royalties is a resident of the other Contracting State, the tax so charged shall not exceed 12.5% of the gross amount of the royalties.

    3.The provisions of paragraphs 1 and 2 of this Article shall not apply if the beneficial owner of the royalties, being a resident of a Contracting State, has in the other Contracting State in which the royalties arise a permanent establishment situated therein or performs in that other State independent personal services from a fixed base situated therein and the right or property in respect of which the royalties are paid is effectively connected with such permanent establishment or fixed base. In such a case, the provisions of Article 7 or Article 14, as the case may be, shall apply.

    4.Royalties shall be deemed to be derived in a Contracting State where the payer is that State itself, a political subdivision, a local authority or a resident of that State. Where,

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    however, the person paying the royalties, whether he is resident of a Contracting State or not, has in a Contracting State a permanent establishment or a fixed base in connection with which the liability to pay the royalties was incurred and such royalties are borne by such permanent establishment or fixed base, such royalties shall be deemed to arise in the Contracting State in which the permanent establishment or fixed base is situated.

    5.Where, owing to a special relationship between the payer and the beneficial owner or between both of them and some other person the amount of the royalties, having regard to the use, right or information for which they are paid, exceeds the amount which would have been agreed upon by the payer and the beneficial owner in the absence of such relationship, the provisions of this Article shall apply only to the last-mentioned amount. In that case, the excess part of the payment shall remain taxable according to the laws of each Contracting State, due regard being had to the other provisions of this Agreement.

    6.The provisions of this Article shall not apply if the right or property giving rise to the royalties was created or assigned mainly for the purpose of taking advantage of this Article and not for bona fide commercial reasons.

    7.In this Article the term “royalties” means payments of any kind received as consideration for the use of, or the right to use, any copyright of literary, artistic or scientific work including cinematograph films and films or tapes used for radio and television broadcasting, any patent, trade mark, design, model, plan, secret formula or process, or for the use of, or the right to use, industrial, commercial or scientific equipment, or for information concerning industrial, commercial or scientific experience.

    Article 13
    Capital Gains
    1.Gains derived in a Contracting State by a resident of the other Contracting State from the sale or alienation of movable and immovable property including shares in companies may be taxed in each of the Contracting States in accordance with the laws of the

    respective States.

    2.Gains derived by an enterprise of a Contracting State from the alienation of ships or aircraft operated in international traffic or movable property pertaining to the operation of such ships or aircraft in international traffic, shall be taxable only in that State.

    Article 14
    Independent Personal Services
    1.Income derived by a resident of a Contracting State in respect of professional services or other activities of an independent character shall be taxable only in that State unless he has a fixed base regularly available to him in the other Contracting State for the

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    purpose of performing his activities. If he has such a fixed base, the income may be taxed in the other State but only so much of it as is attributable to that fixed base.

    2.The term “professional services” includes especially independent scientific, literary, artistic, educational or teaching activities as well as the independent activities of physicians, lawyers, engineers, architects, dentists and accountants.

    Article 15
    Dependent Personal Services
    1.Subject to the provisions of Articles 16, 18, 19, 20 and 21, salaries, wages and other similar remuneration derived by a resident of a Contracting State in respect of an employment shall be taxable only in that State unless the employment is exercised in the other Contracting State. If the employment is so exercised, such remuneration as is

    derived therefrom may be taxed in that other State.

    2.Notwithstanding the provisions of paragraph 1 of this Article, remuneration derived by a resident of a Contracting State in respect of an employment exercised in the other Contracting State shall be taxable only in the first-mentioned State if:

    (a) the recipient is present in the other State for a period or periods not exceeding in the aggregate 183 days in the year of assessment or in the taxable period, as the case may be; and
    (b) the remuneration is paid by, or on behalf of, an employer who is not a resident of the other State; and

    (c) the remuneration is not borne by a permanent establishment or a fixed base which the employer has in the other State.

    3. Notwithstanding the preceding provisions of this Article, remuneration in respect of an employment exercised aboard a ship or aircraft operated in international traffic by an enterprise of a Contracting State may be taxed in that State.

    Article 16
    Directors’ Fees
    1. Directors’ fees and other similar payments derived by a resident of a Contracting State in his capacity as a member of the board of directors of a company which is a

    resident of the other Contracting State may be taxed in that other State.

    2. However, any other remuneration which a person to whom paragraph 1 applies derives from the company in respect of the discharge of day-to-day functions of a managerial or technical nature may be taxed in accordance with the provisions of Article 15.

    Article 17

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    Artists And Athletes

    1. Notwithstanding the provisions of Articles 14 and 15, income derived by a resident of a Contracting State as an entertainer, such as a theatre, motion picture, radio or television artiste, or a musician, or as an athlete, from his personal activities as such exercised in the other Contracting State, may be taxed in that other State.

    2. Where income in respect of personal activities exercised by an entertainer or an athlete in his capacity as such accrues not to the entertainer or athlete himself but to another person, that income may, notwithstanding the provisions of Articles 7, 14 and 15, be taxed in the Contracting State in which the activities of the entertainer or athlete are exercised.

    Article 18
    Pensions And Annuities
    1. Pensions and other similar remuneration paid in consideration of past employment to a resident of a Contracting State and any annuity paid to such a resident

    shall be taxable only in the State from which such income is derived.

    2. The term “annuity” means a stated sum payable periodically at stated times during life or during a specified or ascertainable period of time under an obligation to make the payments in return for adequate and full consideration in money or money’s worth.

    Article 19 Government Service

    1.(a) Remuneration, other than a pension, paid by a Contracting State or a political subdivision or a local authority thereof to an individual in respect of services rendered to that State or subdivision or authority shall be taxable only in that State.
    (b) However, such remuneration shall be taxable only in the other Contracting State if the services are rendered in that State and the individual is a resident of that State who:

    (i) is a national of that State; or
    (ii) did not become a resident of that State solely for the purpose of rendering the services.

    2.The provisions of Articles 15 and 16 shall apply to remuneration in respect of an employment in connection with any business carried on by a Contracting State, or a political sub- division or a local authority thereof for the purpose of profits.

    Article 20
    Students And Trainees
    1.A student or business apprentice who, immediately before visiting a Contracting State, is or was a resident of the other Contracting State and who is temporarily present in the first- mentioned Contracting State primarily for the purpose of his education or training

    shall be exempt from tax in that first- mentioned Contracting State on:

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    (a) payments made to him by persons residing outside that first- mentioned Contracting State for the purpose of his maintenance, education or training; and (b) remuneration from employment in that first-mentioned Contracting State, provided that the remuneration constitutes earnings reasonably necessary for his maintenance and education.

    2.An individual who, immediately before visiting a Contracting State, is or was a resident of the other Contracting State and who is temporarily present in the first-mentioned State primarily for the purpose of study, research or training as a recipient of a grant, allowance or award from a scientific, educational, religious or charitable organisation or under a technical assistance programme entered into by the Government of a Contracting State shall, from the date of his arrival in the first-mentioned State in connection with that visit, be exempt from tax in that State.

    Article 21

    Teachers

    1. A professor or teacher who visits one of the Contracting States for the purpose of teaching or engaging in research at a University or any other similarly recognised educational institution in that State and who, immediately before that visit, was a resident of the other Contracting State shall be exempted from tax by the first- mentioned State in respect of any remuneration received for such teaching or research for a period not exceeding two years from the date of his first arrival in that State for such purpose.

    2. This Article shall apply to income from research only if such research is undertaken by the professor or teacher in the public interest and not primarily for the benefit of some other private person or persons.

    Article 22
    Other Income
    1. Items of income of a resident of a Contracting State, wherever arising, not dealt

    with in the foregoing Articles of this Agreement shall be taxable only in that State.

    2. Notwithstanding the provisions of paragraph 1 of this Article, items of income of a resident of a Contracting State not dealt with in the foregoing Articles of this Agreement and arising in the other Contracting State may also be taxed in that other State.

    Article 23 Elimination Of Double Taxation

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    1. Subject to the provisions of the law of Nigeria regarding the allowance as a credit against Nigerian tax of tax payable in a territory outside Nigeria (which shall not affect the general principle thereof):

    (a) Belgian tax payable under the laws of Belgium and in accordance with this Agreement, whether directly or by deduction, on profits, income or chargeable gains from sources within Belgium (excluding in the case of a dividend, tax payable in respect of the profits out of which the dividend is paid) shall be allowed as a credit against any Nigerian tax computed by reference to the same profits, income or chargeable gains by reference to which Belgian tax is computed.

    (b) In the case of a dividend paid by a company which is a resident of Belgium to a company which is a resident of Nigeria and which controls directly or indirectly at least 10% of the voting power in the company paying the dividend, the credit shall take into account (in addition to any Belgian tax for which credit may be allowed under the provisions of sub- paragraph (a) of this paragraph) the Belgian tax payable by the company in respect of the profits out of which such dividend is paid. In any case, the amount of tax credit to be granted under this sub- paragraph shall not exceed the proportion of Nigerian tax which such profits, income or chargeable gains bear to the entire profits, income or chargeable gains chargeable to Nigerian tax.

    2. In the case of Belgium, double taxation shall be avoided as follows:

    (a) Where a resident of Belgium derives income not dealt with in sub-paragraph (b) or (c) below which may be taxed in Nigeria in accordance with the provisions of this Agreement, other than those of paragraph 2 of Article 10, of paragraphs 2 and 5 of Article 11 and of paragraphs 2 and 5 of Article 12, Belgium shall exempt such income from tax but may, in calculating the amount of tax on the remaining income of that resident, apply the rate of tax which would have been applicable if such income had not been exempted.

    (b) Where a resident of Belgium derives from Nigeria items of his aggregate income for Belgian tax purposes which are:
    — dividends taxable in accordance with paragraph 2 of Article 10 and not exempt from Belgian tax under sub- paragraph (c) below,

    — interest taxable in accordance with paragraph 2 or 5 of Article 11, and — royalties taxable in accordance with paragraph 2 or 5 of Article 12,

    the fixed proportion of the foreign tax for which provision is made under Belgian law shall, under the conditions and at the rate provided for by such law, be allowed as a credit against Belgian tax relating to such income.
    Notwithstanding the provisions of its law, Belgium shall also allow the credit provided for in this sub-paragraph in respect of tax which may be charged in Nigeria on dividends, interest and royalties by virtue of this Agreement and the

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    law of Nigeria, but which is temporarily remitted or reduced under special provisions designed to promote the economic development of Nigeria.
    (c) Where a company which is a resident of Belgium owns shares or other rights in a company with share capital which is a resident of Nigeria and which is subject to Nigerian tax on its profits, the dividends which are paid to it by the latter company and which may be taxed in Nigeria in accordance with paragraph 2 of Article 10, shall be exempt from the corporate income tax in Belgium to the extent that exemption would have been accorded if the two companies had been residents of Belgium.

    (d) Where, in accordance with Belgian law, losses of an enterprise carried on by a resident of Belgium which are attributable to a permanent establishment situated in Nigeria have been effectively deducted from the profits of that enterprise for its taxation in Belgium, the exemption provided for in sub- paragraph (a) shall not apply in Belgium to the profits of other taxable periods attributable to that establishment to the extent that those profits have also been exempted from tax in Nigeria by reason of compensation for the said losses.

    Article 24
    Non-Discrimination
    1. Notwithstanding the provisions of Article 1, nationals of a Contracting State shall not be subjected in the other Contracting State to any taxation or any requirement connected therewith which is other or more burdensome than the taxation and connected requirements to which nationals of that other State in the same circumstances

    are or may be subjected.

    2. The taxation on a permanent establishment which an enterprise of a Contracting State has in the other Contracting State shall not be less favourably levied in that other State than the taxation levied on enterprises of that other State carrying on the same activities.

    3. Enterprises of a Contracting State, the capital of which is wholly or partly owned or controlled, directly or indirectly, by one or more residents of the other Contracting State, shall not be subjected in the first-mentioned State to any taxation or any requirement connected therewith which is other or more burdensome than the taxation and connected requirements to which other similar enterprises of the first-mentioned State are or may be subjected.

    4. Nothing contained in this Article shall be construed as obliging either Contracting State to grant to individuals not resident in that State any of the personal allowances, reliefs and deductions for tax purposes, which are granted to individuals as resident.

    5. Nothing in this Article shall be construed as preventing a Contracting State:

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    (a) from taxing the total amount of the profits attributable to a permanent establishment in that State of a company being a resident of the other Contracting State or of an association having its place of effective management in that other State at the rate of tax provided by the law of the first-mentioned State, but this rate may not exceed the maximum rate applicable to the profits of companies which are residents of that first- mentioned State;

    (b) from imposing its withholding tax on dividends derived from a holding which is effectively connected with a permanent establishment or a fixed base maintained in that State by a company which is a resident of the other Contracting State or by an association which has its place of effective management in that other State and is taxable as a body corporate in the first- mentioned State.

    6. The provisions of this Article shall, notwithstanding the provisions of Article 2, apply to taxes of every kind and description.

    Article 25
    Mutual Agreement Procedure
    1. Where a resident or a national of a Contracting State considers that the actions of one or both of the Contracting States result or will result for him in taxation not in accordance with the provisions of this Agreement, he may, irrespective of the remedies provided by the domestic law of those States, present his case to the competent authority of the Contracting State of which he is a resident or, if his case comes under paragraph 1 of Article 24, to that of the Contracting State of which he is a national. The case must be presented within three years from the first notification of the action

    resulting in taxation not in accordance with the provisions of the Agreement.

    2. The competent authority shall endeavour, if the objection appears to it to be justified and if it is not itself able to arrive at a satisfactory solution, to resolve the case by mutual agreement with the competent authority of the other Contracting State, with a view to the avoidance of taxation not in accordance with the Agreement.

    3. The competent authorities of the Contracting States shall endeavour to resolve by mutual agreement any difficulties or doubts arising as to the interpretation or application of the Agreement.

    4. The competent authorities of the Contracting States may communicate with each other directly for the purpose of reaching an agreement in the sense of the preceding paragraphs.

    Article 26 Exchange of Information

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    1. The competent authorities of the Contracting States shall exchange such information as is necessary for carrying out the provisions of this Agreement or of the domestic laws of the Contracting States concerning taxes covered by the Agreement insofar as the taxation thereunder is not contrary to the Agreement. The exchange of information is not restricted by Article 1. Any information received by a Contracting State shall be treated as secret in the same manner as information obtained under the domestic laws of that State and shall be disclosed only to persons or authorities (including courts and administrative bodies) involved in the assessment or collection of, the enforcement or prosecution in respect of, or the determination of appeals in relation to, the taxes covered by the Agreement. Such persons or authorities shall use the information only for such purposes but may disclose the information in public court proceedings or in judicial decisions.

    2. In no case shall the provisions of paragraph 1 be construed so as to impose on a Contracting State the obligation:

    (a) to carry out administrative measures at variance with the laws and administrative practice of that or of the other Contracting State;
    (b) to supply information which is not obtainable under the laws or in the normal course of the administration of that or of the other Contracting State;

    (c) to supply information which would disclose any trade, business, industrial, commercial or professional secret or trade process, or information, the disclosure of which would be contrary to public policy.

    Article 27
    Diplomatic and Consular Officials
    1 Nothing in this Agreement shall affect the fiscal privileges of diplomatic and consular officials under the general rules of international law or under the provisions of

    special agreements.

    2. Notwithstanding paragraph 1 of Article 4, an individual who is a member of the diplomatic, consular or permanent mission of a Contracting State which is situated in the other Contracting State and who is liable to tax in that other State only if he derives income from sources therein, shall be deemed to be a resident of the sending State.

    Article 28
    Entry Into Force
    1. The Governments of the Contracting States shall notify to each other that the constitutional requirements for the entry into force of this Agreement have been

    complied with.

    2. This Agreement shall enter into force thirty days after the date of the latter of the notification referred to in paragraph 1 and its provisions shall have effect:

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    (a) in Nigeria:
    (i) in respect of withholding tax on income and taxes on capital gains derived by a non-resident, in relation to income and capital gains derived on or after 1st January in the calendar year immediately following that in which the Agreement enters into force;
    (ii) in respect of other taxes, in relation to income of any basis period beginning on or after 1st January in the calendar year immediately following that in which the Agreement enters into force;

    (b) in Belgium:
    (i) in respect of taxes due at source on income credited or payable on or after 1st January in the calendar year immediately following that in which the Agreement enters into force;
    (ii) in respect of taxes other than taxes due at source, on income of any taxable period beginning on or after 1st January in the calendar year immediately following that in which the Agreement enters into force.

    Article 29
    Termination
    This Agreement shall continue in force until terminated. Either of the Contracting States may through diplomatic channels give written notice of termination at least six months before the end of any calendar year, and in that event, this Agreement shall

    cease to be effective:

    (a) in Nigeria:
    (i) in respect of withholding tax on income and taxes on capital gains derived by a non-resident, in relation to income and capital gains derived on or after 1st January in the calendar year immediately following that in which the notice of termination is given;
    (ii) in respect of other taxes, in relation to income of any basis period beginning on or after 1st January in the calendar year immediately following that in which the notice of termination is given;

    (b) in Belgium:
    (i) in respect of taxes due at source on income credited or payable on or after 1st January in the calendar year immediately following that in which the notice of termination is given;
    (ii) in respect of taxes other than taxes due at source, on income of any taxable period beginning on or after 1st January in the calendar year immediately following that in which the notice of termination is given.

    In witness whereof, the undersigned, duly authorised thereto, have signed this Agreement.

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    Done in duplicate at Brussels, this twentieth day of November 1989 in the English language.