Nigeria: Restricted withholding tax credit note carryforwards

Nigeria: Restricted withholding tax

Nigeria’s tax agency—the Federal Inland Revenue Service (FIRS)—is placing restrictions on taxpayers’ use of withholding tax credit notes to settle a company’s income tax liability, by limiting the ability to carry forward withholding credit notes to those liabilities relating to the basis period for the relevant tax year.

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In a particular instance, a letter from FIRS to the taxpayer states that the company can only use withholding tax credit notes relating to its 2015 financial year to settle its 2016 income tax liability—and not any withholding tax credits brought forward from prior fiscal years.

According to the FIRS, the transfer of withholding tax credit notes from one tax year to another will be treated as a tax refund. As such, the FIRS intends to conduct special withholding tax audits of those taxpayers that intend to carry forward withholding tax credits before such credit transfers can be approved.

KPMG observation

Tax professionals in Nigeria question the FIRS position concerning the treatment of withholding tax credit notes because the policy appears to deprive taxpayers of certain statutory rights—specifically, the right to elect to receive a cash refund, or the right to apply withholding tax credit notes pursuant to established measures under the tax law. Some believe that the the tax authorities will eventually reverse this policy.  


Read an August 2016 report [PDF 75 KB] prepared by the KPMG member firm in Nigeria: FIRS restricts taxpayers from carrying forward withholding tax credits

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