The National Assembly has proposed significant amendments to the Companies Income Tax Act (CITA), aimed at tightening tax enforcement on foreign shipping and aviation firms operating in Nigeria.

The tax reform bills are now before President Tinubu for assent.

Both chambers of the National Assembly had last week, adopted a harmonised version of the tax reform bills submitted by the conference committee.

The reports were presented by Sani Musa, chairman of the conference committee, who also chairs the finance committee in the Red Chamber, and James Faleke, chairman of the House Committee on Finance (APC, Lagos).

At the heart of the reform is the amendment to Section 14, which governs the taxation of foreign transport companies.

According to the revised provision of the Nigerian tax bill, foreign companies engaged in sea or air transport will now be taxed on profits accruing from carriage services initiated in Nigeria, regardless of where the company is domiciled.

“Where a company (whether or not a Nigerian company) carries on the business of transport by sea or air and calls at any port in Nigeria, the profits of the company from the carriage of passengers, mails, livestock or goods shipped, or loaded into an aircraft in Nigeria, shall be deemed to be derived from Nigeria,” read Section 14(1) of the bill.

This means that even if the company is not registered in Nigeria, it is still liable for tax on all cargo and passengers originating from the country.

The only exception, as stated in Section 14(2), applies where “the carriage is undertaken solely for the purpose of trans-shipment or of transfer from one form of transport to another.”

Furthermore, Section 14(4) introduces an anti-tax avoidance mechanism, allowing Nigerian tax authorities to apply foreign ratios to determine profit where reciprocal laws exist:

“Where the Board is satisfied that a company has been assessed to tax… in a country outside Nigeria which imposes tax on profits similar to the tax imposed by this Act… the Board may adopt the ratio of profit to receipts and the ratio of depreciation to receipts from that country and apply them to the operation in Nigeria.”

In the absence of such data, Section 14(5) authorises the use of a fair percentage of the company’s total Nigerian revenue to ascertain tax.

Additionally, a minimum tax threshold of two percent of gross revenue from Nigerian operations is now established under Section 14(6).

To support enforcement, Section 14(8) now mandates that regulatory authorities in the maritime and aviation sectors request evidence of income tax filing and tax clearance certificate for the preceding three years before granting any operational permit. (BusinessDay)