Sources of Tax Law in Nigeria

Sources of Tax Law in Nigeria

Introduction

Taxation is the lifeblood of any functioning government. It provides the revenue needed to deliver public services, develop infrastructure, maintain law and order, and support national development. In Nigeria, tax law forms the legal framework that regulates how taxes are imposed, assessed, collected, and managed across all levels of government.

The Nigerian tax system derives its authority from various legal, constitutional, statutory, and administrative sources. Understanding these sources is essential for individuals, corporate entities, tax professionals, lawyers, accountants, and government agencies.

This article presents a detailed examination of the sources of tax law in Nigeria, exploring each category, its authority, application, and significance within the Nigerian tax framework.

What is Tax Law?

Tax law refers to the body of rules, regulations, and principles that govern the imposition, assessment, administration, and enforcement of taxes by the government. In Nigeria, tax law covers both direct taxes (e.g., personal income tax, company income tax) and indirect taxes (e.g., value-added tax, customs duties).

Classification of Sources of Tax Law in Nigeria

The sources of tax law in Nigeria can be broadly classified into the following categories:

1. The Constitution of the Federal Republic of Nigeria

2. Statutes (Legislation)

3. Subsidiary Legislation and Regulations

4. Judicial Decisions (Case Law)

5. International Treaties and Conventions

6. Administrative Guidelines and Circulars

7. Customary Law (in limited contexts)

Let’s explore each source in detail.

1. The Constitution of the Federal Republic of Nigeria (1999, as amended)

The Constitution is the supreme law of the land. It lays the foundation for all laws in Nigeria, including tax laws. The Constitution establishes the framework for:

• Division of legislative powers

• Taxing authority

• Jurisdiction of various levels of government

• Fundamental rights in taxation

✅ Key Constitutional Provisions:

Section 4

• Outlines legislative powers of the Federal and State governments.

Part I and II of the Second Schedule

• Exclusive Legislative List – Lists items the federal government has authority over, including taxation of incomes, profits, capital gains, and customs.

• Concurrent Legislative List – Allows both federal and state governments to legislate on issues like stamp duties and capital gains in certain contexts.

Section 162

• Deals with the Federation Account and the distribution of revenue between federal, state, and local governments.

Section 1(3)

• Affirms that any law inconsistent with the Constitution is void to the extent of its inconsistency.

✅ Significance:

The Constitution defines the scope of taxing powers, and any tax law or policy that violates constitutional provisions can be struck down by the courts.

2. Statutes (Tax Legislations)

This is the primary source of tax law in Nigeria. Tax statutes are laws enacted by the National Assembly or State Houses of Assembly to create, regulate, and enforce specific taxes.

These statutes define:

• Who is to be taxed

• What income or activity is taxed

• Tax rates and exemptions

• Payment and filing obligations

• Penalties and dispute resolution

✅ Major Federal Tax Statutes Include:

1. Personal Income Tax Act (PITA) 2011 (as amended)

   • Governs taxation of individuals and partnerships

   • Administered by State Boards of Internal Revenue

2. Companies Income Tax Act (CITA) Cap C21, LFN 2004 (as amended)

   • Regulates taxation of companies

   • Administered by the Federal Inland Revenue Service (FIRS)

3. Value Added Tax Act (VATA) Cap V1, LFN 2004 (as amended)

   • Imposes VAT on goods and services in Nigeria

4. Capital Gains Tax Act Cap C1, LFN 2004

   • Tax on gains from disposal of chargeable assets

5. Stamp Duties Act Cap S8, LFN 2004

   • Taxes on instruments and legal documents

6. Petroleum Profits Tax Act (PPTA)

   • Applicable to petroleum exploration and production companies

7. Tertiary Education Trust Fund (Establishment, etc.) Act 2011

   • Governs education tax paid by companies

8. Finance Acts (2019, 2020, 2021, 2022, 2023)

   • Series of annual reforms that amend and harmonize multiple tax laws

✅ State-Level Statutes:

Each state may enact laws for internally generated revenue such as:

• Tenement rates

• Business premises levies

• Land use charges

• Motor vehicle taxes

✅ Significance:

These statutes provide the specific operational rules of taxation in Nigeria and are binding until repealed or amended.

3. Subsidiary Legislation and Regulations

These are rules and guidelines made under the authority of primary tax statutes. They include:

• Ministerial orders

• Tax regulations

• FIRS circulars

• State internal revenue rules

They provide clarity, implementation details, and procedural guidance on how tax laws are to be applied.

✅ Examples:

• Income Tax (Transfer Pricing) Regulations 2018

• National Tax Policy

• FIRS Tax Administration (Self-Assessment) Regulations 2011

✅ Importance:

Subsidiary legislation is critical for daily tax administration and ensures uniform compliance with statutory provisions.

4. Judicial Decisions (Case Law)

Judgments from Nigerian courts serve as binding precedents, especially from higher courts like the Supreme Court and Court of Appeal.

The interpretation of tax laws by the courts helps:

• Resolve ambiguities in legislation

• Clarify the intention of lawmakers

• Protect taxpayers’ rights

• Ensure administrative fairness

✅ Notable Tax Cases:

1. FBIR v. Halliburton (WA) Ltd (2016) – Interpreted tax obligations under PITA.

2. UBA Plc v. FIRS (2021) – On the jurisdiction of tax tribunals.

3. AG Lagos State v. Eko Hotels Ltd & Anor (2018) – Landmark VAT jurisdiction case.

✅ Significance:

Judicial decisions form part of Nigeria’s common law tradition and influence tax compliance, planning, and dispute resolution.

5. International Treaties and Conventions

Nigeria is a party to several international tax treaties, especially Double Taxation Agreements (DTAs) signed with other countries. These treaties aim to:

• Avoid double taxation

• Prevent tax evasion

• Encourage cross-border trade and investment

Under Section 12 of the Constitution, treaties must be domesticated through legislation before they have the force of law in Nigeria.

✅ Examples:

• Nigeria–United Kingdom Double Taxation Treaty

• ECOWAS Common External Tariff

• OECD Model Tax Convention (for reference)

✅ Impact:

These treaties guide tax treatment of foreign-source income, withholding taxes, residency rules, and international transfer pricing.

6. Administrative Guidelines, Circulars, and Rulings

The Federal Inland Revenue Service (FIRS) and State Internal Revenue Services (SIRS) issue administrative notices to guide taxpayers.

While not laws in themselves, these circulars help:

• Interpret the tax laws consistently

• Provide procedural guidance on assessments, filing, and audits

• Inform taxpayers of policy changes

✅ Examples:

• FIRS Circular on Stamp Duty Clarification (2020)

• FIRS Guidelines on Electronic Tax Filing

• Lagos State IRS Circular on Land Use Charge

✅ Legal Status:

They are persuasive, not binding, and must not conflict with existing statutes or constitutional rights. Courts may strike down any that exceed administrative powers.

7. Customary Law (Limited Relevance)

Customary law rarely plays a role in tax matters. However, in limited local contexts (e.g., market levies, community development contributions), customary practices may guide the collection of communal levies, especially in rural or traditional communities.

This is more common at the local government level or within community-based taxation systems.

Interplay Between Federal, State, and Local Tax Authorities

The Nigerian tax system is multi-tiered:

✅ Federal Taxes (administered by FIRS)

• Companies Income Tax

• VAT

• Petroleum Profits Tax

• Stamp Duties (inter-state)

• Education Tax

✅ State Taxes (administered by SIRS)

• Personal Income Tax

• Business Premises Levy

• Capital Gains (individuals)

• Motor Vehicle Registration

✅ Local Government Levies

• Tenement rates

• Market taxes

• Signage and advertisement fees

The Joint Tax Board (JTB) promotes uniformity in tax policies and resolves conflicts among the various tax authorities.

Challenges in Nigeria’s Tax Legal Framework

Recent Reforms and Developments

Nigeria’s tax system is undergoing major reforms through:

• Finance Acts (2019–2023) – Updating and harmonizing tax laws

• Automation of Tax Systems – e-filing and online portals

• Voluntary Assets and Income Declaration Scheme (VAIDS)

• Tax Appeal Tribunal (TAT) – For faster tax dispute resolution

• National Tax Policy Review – Promoting fairness and clarity

Conclusion

Understanding the sources of tax law in Nigeria is vital for proper tax compliance, dispute resolution, and policy reform. These sources range from the Constitution and statutes to judicial interpretations, treaties, and administrative guidelines. They define the scope, powers, rights, and obligations of all parties in the tax ecosystem.

As Nigeria continues to modernize its tax regime, businesses and individuals must keep abreast of evolving laws, policies, and interpretations to remain compliant and avoid penalties.

At Chaman Law Firm, we provide legal support in tax planning, tax dispute resolution, compliance advisory, and regulatory services to help clients navigate Nigeria’s complex tax landscape.

Contact Us

Are you a business owner, investor, or taxpayer in Nigeria? Knowing the sources of tax law is essential for legal compliance, accurate reporting, and smart financial planning.

At Chaman Law Firm, we break down complex tax regulations and guide you through the constitutional provisions, legislative enactments, case law, subsidiary legislation, and administrative guidelines that govern taxation in Nigeria.

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✉ Email: chamanlawfirm@gmail.com

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