TAXATION OF FOREIGN COMPANIES IN NIGERIA by Odoemenam Chidi

TAXATION OF FOREIGN COMPANIES IN NIGERIA by Odoemenam Chidi

The recent and drastic fall in oil
prices in the global market has hit hard on oil revenue dependent nations,
Nigeria inclusive. Thus, this has led the Government to create budgetary
policies seeking to resort to other sources of revenue, taxation being at the
forefront. However, if the Nigerian government is determined to increase its
tax revenue base, then certainty of laws governing corporate taxation of both
Nigerian and foreign companies carrying on business in Nigeria has to be at the
premium. 
While a Nigerian company is taxable on
its worldwide income, a non-resident entity is liable to tax in Nigeria on its
profit attributable to the business or trade carried on in Nigeria. The issue of
taxation of foreign unincorporated companies in Nigeria has often stirred up
legal controversy.

This may be attributed to the conflicting provisions in the
Companies and Allied Matters Act and the Companies Income Tax Act. While the
CAMA provides that foreign companies seeking to carry on business in Nigeria
must first incorporate with the Corporate Affairs Commission (except companies
exempted under the CAMA) before they can be allowed to carry on business in
Nigeria, the CITA offers a sharp contrast to this rule, stating that a foreign
company need not be incorporated before it can be deemed to have carried on
business in Nigeria, insofar as it falls under the provisions of section 13
of the CITA. Thus, supporters of the derogation of the rule in section
54
of the CAMA by the CITA may reiterate the dictum of Lord
Morrison
in Ministry of Finance v Smith (1927) AC 193 at 193,
where the court stated that if a company carries on trade illegally and makes a
profit, such profit is subject to tax.
Taxation of Foreign Companies under the
CITA
Section 9(1) of the Nigerian Companies
Income Tax Act (CITA)
provides that tax is payable at the specified rate
upon the profits of any company accruing in, derived from,
brought into, or received in Nigeria in respect of certain transactions
(emphasis mine). The specified rate for corporate taxation in Nigeria,
excluding companies involved in upstream petroleum operations is 30% CIT and 2%
Education tax.
By the provisions of Section 13(2)
of the CITA, the profits of a company, other than a Nigerian company,
from any trade or business are deemed to be derived from Nigeria in the
following circumstances-
1.     If that company has a
fixed base (as limited in section 13(3)) of business in Nigeria to the extent
that the profits are attributable to the fixed base.
2.     If it does not have a
fixed base but habitually operates a trade or business through a person in
Nigeria, or in circumstances set out in section 3(2)(b)
3.     If the trade or
business involves a single contract for surveys, deliveries, installation or
construction, the profit from the contract (turnkey contract).
4.     Where the trade or
business are not made at an arm’s length.
The Supreme Court while interpreting
the meaning of “fixed base” in Shell International Petroleum BV v
FBIR
stated that the phrase should not be confused with “residence”, but
that in the context of the CITA, it connotes a place where a company has
carried on business for a long time notwithstanding that it is not the owner of
the place.
It is noteworthy to note that sequel to
a ruling obtained in SAIPEM v FIRS, where the court held that the
profits of a foreign company once derived from Nigeria are subject to tax
regardless of whether any of the conditions in section 13 has been met, the
FIRS has utilized the provisions of section 30 of the CITA which empowers the
Federal Inland Revenue Service (FIRS) to assess companies to income tax based
on a reasonable percentage of turnover. This is referred to as the deemed
profit basis, best of judgment assessment or presumptive taxation.
In practice, the FIRS while assessing
non-resident companies to tax, prescribes a deemed profit of 20% of turnover
derived from Nigeria (assuming all tax deductible expenses and capital
allowance of 80%), which is then taxed at the corporate income tax rate of 30%.
This results in an effective tax of 6% of turnover. This assessment basis has
been widely adopted by non-resident companies, mostly due to its simplicity and
the fact that disputes regarding tax deductibility of costs would be avoided.
A clear reading of the decision of the
court in SAIPEM v FIRS would deduce that a non-resident company who
although does not fall under the fixed base rule or other provisions of section
13 of the CITA would still be liable to Nigerian Corporate Tax if the FIRS can
prove that the company derived income from Nigeria.
However, in a judgment delivered by
Justice M.B IDRIS of the Federal High Court sitting in Ikoyi on September 18th
2015 in the case between JGC v FIRS, being an appeal from the Tax Appeal
Tribunal, the court overruled its earlier ruling in SAPIEM’s case. In the
aforementioned case, the FIRS had raised notices of assessment on JGC who had
entered into a contract with Mobil Nigeria Unlimited but had not performed any
part of the contract in Nigeria. The court held that JGC was not liable to pay
Nigerian corporate tax unless it falls under the provisions of section 13 of
the CITA.
CONCLUSION
The varying judgments of the Federal
High Court in SAIPEM v FIRS and JGC v FIRS coupled by the recent
directive issued by the Transfer Pricing Division of the FIRS where it directed
non-resident companies to comply with the provisions of the CITA and file its
full tax returns, all are unneeded uncertainties which will only harm the trust
placed on the revenue authorities in this time when the country is in dire need
of tax payers money.
CELEBRATING ONE NIGERIA by Chika Maduakolam

CELEBRATING ONE NIGERIA by Chika Maduakolam

So, I will admit that this piece is inspired by the
holiday season. In the midst of all ‘jollyment’, the winds of reflection blew
my way. In this sombre spirit, family gatherings produced a ripe atmosphere for
the usual ‘Nigerian Complain Banter’ (a staple meal in most Nigerian
gatherings).
The difference is that this time, while everyone was
giving their unsolicited 70 cents of opinions on topics ranging from religion
to  politics to generational ills in the system, and what the like (oh,
the richness of Nigerian gisting!), I watched. Just watched. Looking around at
the array of people gathered. Let me throw a little more light on my thought
process:

I am from a predominantly Igbo family; when family and
friends gather, you find an array of people, from Yoruba to Delta to Hausa to
Cross river. Even a cursory look at my array of closest friends, I find the
same position reflected. Not to make this rant on ethnic biases and the lot, I
will state the takeaway from this is that Nigerians are an interesting lot.
Despite heated exchanges about the polity,
incompetencies in all sectors, personal and cultural opinions on everything;
what I marvel at is the fact that these people gather, year in, year out, for
birthdays, anniversaries, remembrances, christmas, practically any cause for
celebration, without fear of reprise from one another or animosity for their
respective stances or even for the mere ‘beef’ of ethnic differences.
Albeit, this is not an isolated case. I know of
several other homes where this is also the case.
Nigerians are a special lot. We fight, we unite, we
criticise, we praise, we cry, we laugh, we complain, we survive. I may not see
it all!! As I am always quick to point out, I only speak from the extent which
my glass covers!! But what I have seen, I have marvelled. In a country with
constant rife about the differences in our ethnicity, language and even
political divides, we still find time to celebrate, whether it is all for the
cause of Jollof rice or for Eba/Pounded Yam, we can still find points of
harmony and unity.
It makes one wonder; why then do we find it easy to
segregate issues as belonging to one particular group or the other-boko haram
is a northern problem, kidnapping is an eastern problem, etc…
I would think, from my myopic standpoint, it all boils
down to human nature. At the heart of it, no one wants to deal with an
inconvenience they can excuse themselves from. My consolation from this is that
this does not stem from the place of an ethnic group spouting ideologies of
hatred for others and calling for the extinction of other ethnic groups.
Even if there are some instances of such ideologies,
it is, thankfully, not a prevalent one.
Let this be my conclusion: We can be our greatest
enemies but I do not fail to recognise the fact that we are also our greatest
friends!!
Happy New Year!!

THE CHRISTMAS DEED

THE CHRISTMAS DEED

THIS DEED OF CHRISTMAS is made this 25th day of December 2015 BETWEEN 
JESUS CHRIST of Heaven (the Saviour) on the one part AND
ANYONE, of Earth ( the Saved ) on the other part.
 WHEREAS 
1, The Saviour the holder of Eternal Life .
2, The Saviour has agreed to dash life to anybody who wants for the sum of $ 0….
NOW THIS DEED WITNESS AS FOLLOWS. 
In consideration of life given by the Saved to the Saviour with no receipt but the Saviour still acknowledges.
THE SAVIOUR AS ETERNITY HOLDER ASSIGNS All That Eternity situated at Heaven .
TO HOLD to the Saved for the unexpired residue of The Saviours Life, the said right of Eternal life subject to the provisions of the Holy Scriptures.
IN WITNESS  OF WHICH the parties executed this deed after the Death of Christ in the Manner he was killed ( crucifixion ) the day and year first above written. 
SIGNED, SEALED AND DELIVERED 
By the within Name Saviour 
In the presence of:
Name: Angel Gabriel 
Address: No 2 God Road, Heaven. 
Occupation: Fighting Forces of Evil. 
Signature…………….. 
NOTE if you still a sinner you would need a Sinners Jurat.
Example: God Forgive Me Of My Sins and Accept Me In Jesus Name.  Amen 🙏🏼.
Merry Christmas…
Standard Bank $30 Million fine – the issues by Babatunde Akinyanju

Standard Bank $30 Million fine – the issues by Babatunde Akinyanju

On Monday 30th November 2015, in a crowded courtroom at the High Court in London, legal history was made when a senior judge ordered ICBC Standard Bank Plc to pay US$30 million to avoid a criminal conviction following a US$600 million bribery scandal in Tanzania.

Chinese-owed bank
The Rt. Hon.Sir Brian Leveson, President of Queen’s Bench Division made a ruling under a negotiated agreement between the prosecutor, The Serious Fraud Office (SFO) and the UK arm of the South African and Chinese bank. (On 1st February 2015, the Industrial & Commercial Bank of China Ltd (ICBC) acquired a 60% controlling stake of Standard Bank in the UK). The declaration known as a ‘Deferred Prosecution Agreement’ (DPA) suspends any criminal prosecution against the bank provided the sum of $30 million is paid by Monday, 7th December 2015, and it complies with other conditions within the next three years. 
Stanbic Bank, Tanzania
Standard Bank, a UK regulated bank (SBUK), at the relevant time was a subsidiary of Standard Bank Group Ltd, a publicly-owned company registered in South Africa. Another subsidiary of the Standard Bank Group was Stanbic Bank Tanzania Ltd (Stanbic) located in Dar es Salam. 
In 2012, the Tanzanian Government needed to raise public funds to support its ongoing “five-year development plan” for infrastructure development.  Significantly, Stanbic was not licensed to deal with non-local foreign investors in the capital markets. It therefore teamed up with SBUK to perform that role. SBUK and Stanbic submitted a joint proposal for the mandate to raise funds for the Tanzanian Govt. by way of a sovereign note placement. The transaction was significant, US$600 million, and offered future business opportunities in Tanzania for SBUK and Stanbic.
Tanzanian Government Officials 
Negotiations began in February 2012 when both banks quoted a combined fee of 1.4% of gross fees raised. In September 2012, Stanbic increased the proposed fee to be paid by the Tanzanian Govt to 2.4%. It transpired that the extra one percent fee would be paid to a “local partner”, a Tanzanian-registered company known as Enterprise Growth Market Advisors Ltd (EGMA). EMGA’s chairman and one of its three shareholders was Mr Harry Kitilya. Mr Kitilya also happened to be Commissioner of the Tanzania Revenue Authority, therefore, a serving member of the Tanzanian Govt. The Managing Director of EMGA was Dr Fraten Mboya (CEO of the Tanzanian Capital Markets & Securities Authority from 1995-2011). Stanbic did not address this conflict of interest.
SBUK was unaware of the proposed involvement of EMGA as a local partner in this transaction (along with the 1% increase in the fee) until after the proposal had been submitted to the Tanzanian Govt. When subsequent investigations were carried out no documentation could be found to explain what role if any EMGA had played in securing the deal. 
Lack of Due Diligence 
By the end of September 2012, EMGA opened a bank account with Stanbic, which obliged the bank to carry out regulatory checks (“Know Your Customer”). The checklist acknowledged that the account was “high risk”, but failed to specify reasons for this conclusion. The regulatory check also failed to mention the role of Mr Kitilya in government and that both he and Mr Mboya were “politically exposed persons”. SBUK failed to carry out its own due diligence checks on the two individuals, relying instead on the information provided by Stanbic.
False Mandate for US$6m Bribe
In November 2012, the mandate and fee letters were signed. The mandate was between SBUK, Stanbic and the Tanzanian Federal Ministry of Finance. This mandate made no mention of EMGA and referred to the “total facilitation” fee of 2.4%, constituting “total advisory, arranging co-ordinator participation and book runner fees”. It also included “disbursement costs and agency costs”. The fee letter referred to SBUK and Stanbic agreeing to act as lead managers “in collaboration with its partner.” The deal made provision for a 1% fee to be paid from Tanzanian public funds to EMGA via Stanbic, without the payment coming through normal government channels.
Stanbic Senior Executives 
The mandate was formally granted to SBUK and Stanbic in November 2012. When the financing was completed by March 2013, the amount raised was US$ 600 million. Stanbic paid EMGA the 1% fee (US$ 6 million) into an additional Stanbic collection account. Within 10 days of payment the MD of EMGA Mr Mboya withdrew majority of the $6m in cash. This was with the consent and assistance of two Stanbic senior executives Bashir Awale, CEO and Shose Sinare, Head of Corporate & Investment Banking. Mr Sinare authorised the transfer of the outstanding balance to EMGA’s account.
Standard Bank raises the dust
Other staff at Stanbic queried the cash withdrawals from EMGA and reported the matter to the head office, Standard Bank Group in South Africa and to SBUK. Internal investigations were carried out. SBUK instructed lawyers in London (Jones Day) who reported the matter to the prosecuting agency in the UK, the Serious Fraud Office (SFO). 
Prosecution and Defence negotiate
SBUK co-operated fully with the SFO and after negotiations and an agreement on the circumstances that transpired in Tanzania. The SFO accepted that SBUK had not been directly involved in the offence of bribery. Nevertheless, by not carrying out necessary checks SBUK had committed an offence. The SFO, in accordance with its Codes of Practice decided that rather than proceed with prosecution it would seek a Deferred Prosecution Agreement (DPA).
Interests of Justice Test (Para 8, Sch 15, Crime & Courts Act 2013)
1.The Director of the SFO concluded that: there was sufficient evidence that the organisation SBUK had committed an offence of failing to prevent bribery, contrary to s7 of the Bribery Act 2010; secondly, that it was in the public interest for the matter to be dealt with by a DPA (in accordance with the DPA Code of Practice).
2. Thereafter the SFO and SBUK agreed a provisional agreement as to the terms of the DPA.
3. The matter was considered by Justice Leveson on 4th November 2015, in private, when he heard submissions from Queen’s Counsel instructed by both parties. The SFO was seeking a Declaration that entering into a DPA with the organisation (SBUK) was likely to be in the interests of justice, and the proposed terms of the DPA were fair, reasonable and proportionate. 
4. In applying the ’Interests of justice test’ under Rule 11.3(3)(i) Criminal Procedure Rules 2015 Sir Brian considered the following:
Seriousness of the conduct: the alleged bribery committed by two senior executives of Stanbic with the intention to bribe a public official, using public funds for the bribe payment, such as could compromise the integrity of the financial market. He noted that SBUK was not involved in the bribery.
SBUK’s potential criminality arising out of its own compliance procedures and failure to recognise the risks inherent in the proposal. 
SBUK immediately reported itself to the authorities and adopted a genuinely proactive approach to the matter- a factor recognised in the DPA Code of Practice.
SBUK conducted a detailed internal investigation that had been sanctioned by the SFO and reported its findings. The statement of facts presented to the judge by the SFO was substantially reliant on the evidence voluntarily disclosed by SBUK.
SBUK employees responded promptly to requests by the SFO for information and material.
SBUK had no previous criminal investigations or convictions save for a civil sanction imposed in 2011, by the Financial Conduct Authority for lax anti-money laundering procedures.
SBUK had enhanced its compliance policies, procedures and processes since 2011
There was now a new board of directors at SBUK following its acquisition by ICBC in Feb 2015.
On 30th November 2015 the court declared the DPA in the following terms:
Compensation to the Tanzanian Govt. of US$6m, plus interest of US$ 1,153,125;
Disgorgement of fee income of US$ 8.4m (the sum paid to SBUK and Stanbic as Lead Managers) 
Financial penalty in the sum of US$ 16.8m;
Costs of the SFO £330,000
In addition, (not part of the DPA, but taken into account by the judge) SBUK agreed a civil settlement of US$4.2m, to the US Securities and Exchange Commission, for violation of US Securities Law as a result of this transaction.
The bank must also continue to co-operate with the SFO and show evidence of improvement in its compliance procedures over the three-year period of the DPA. The Bribery Act charge of Failing to Prevent Bribery is suspended for the duration of the order.
High Standards of Banking required for Business 
In his concluding remarks the judge noted that the UK registered bank acquiesced, albeit unwittingly in large scale bribery, which was preventable had the proper procedures being followed. He went on to say that: ”Standard Bank has far better served its shareholders, its customers and its employees (as well as those with whom it deals) by demonstrating its recognition of its serious failings and its determination in the future to adhere to the highest standards of banking. Such an approach can itself go a long way to repairing and, ultimately enhance its reputation and in consequence its business.” 
Babatunde Akinyanju is a lawyer and training consultant based in the UK and Nigeria
bakinyanju@femodajuris.com           @bakinyanju
4th December 2015   © Copyright Babatunde Akinyanju. All rights reserved.
ENHANCING QUALITY OF LEGAL PRACTICE IN NIGERIA: HOW G. ELIAS GOT ISO CERTIFICATION

ENHANCING QUALITY OF LEGAL PRACTICE IN NIGERIA: HOW G. ELIAS GOT ISO CERTIFICATION


Credits – Esqlaw.net

Editor’s note: Interview by Lere Fashola as originally posted on www.esqlaw.net 
 
Your firm is relatively small in terms of number of
employees or partners yet it leads the pack in most of the highly sophisticated
finance transactions? Is there a deliberate decision to keep it small?
 
No,
we have no decision to be or not be any particular size in absolute terms. The
decision is to have enough lawyers to be able to service our clients
superlatively in the practices and sectors that we choose to be in at any given
time. We have always had enough lawyers for that. Size is perhaps also relative
to the beholder. With more than 30 lawyers today, there are observers who would
say that we are not small.

You got ISO certification about three years ago and I
suspect you are the only Nigerian law firm with such certification. How did you
come about this and what is its significance?
 
About
5 years ago, we thought that it was important to have consistency in the
quality of our service as we were increasing in number. We explored options to
address the issue. ISO 9001:2008 quality management system certification seemed
to us both then and now to be a good way to do so
 It
means that an independent, reputable and proficient observer has rightly
confirmed that we have a quality management system in place with standardized
procedures and processes that ensure that we deliver quality service to our
clients consistently.
You played an active role in the recent Power
Privatisation exercise. How will you assess the exercise and what are some of
the challenges that may likely arise from the exercise?
 The
exercise was a big step forward, but much work still needs to be done. Nigeria
is the first country to have privatized its state-owned electricity assets
fairly comprehensively all at one go rather than in stages spread over several
years. The challenges are well-known. Many of the privatized businesses are
still finding their feet. They do not have enough gas, there are issues with
losses (both technical and commercial), the grid is still weak and a number of
acquirers are very highly leveraged. After nearly two years, the average
consumer still does not get much electric power from the grid.
I have also seen your contributions in some of the most
celebrated M&A deals in Nigeria. What trend can you identify in this area
and how are you helping your clients to mitigate risks?
M&A
activity will continue to grow as more opportunities emerge and the stock of
competent managers available becomes deeper and broader. As the Nigerian
economy expands, M&A deal sizes will increase. We help our clients to
mitigate the risks by working with them and their counterparties creatively and
with speed to develop viable deal structures, regulatory support and bespoke
documentation, and do thorough “due diligence” investigations.
You recently joined the ALN which is a network of
lawyers in East Africa. Why the link with EA.
 The
ALN is not “a network of lawyers in East Africa”. It started in East Africa but
has always been pan-African in outlook. It is a network of independent top-tier
African business law firms. Its core features of independence, business and
Africanness resonate very loudly with us. Business across African countries has
been growing and has a huge future. An organization of lawyers that is set to
ride on that growth should be attractive to every lawyer.
Can you give us some general information about your
practice in Nigeria?
Our
main practices are corporate, banking, capital markets, intellectual property,
tax, employment and disputes. We engage in these practices across sectors of
the economy such as electricity, oil-and-gas, financial institutions,
logistics, consumer products, telecommunications media and technology, and real
estate]
Who are your clients, and what type of issues do you
help them with?
 They
are an eclectic lot. We have leading global multinationals, continental giants,
state-owned enterprises, leading indigenous groups and start-ups. We do not
have a special preference for either public sector, established or foreign
clients. We are comfortable with anyone who is decent, whose economics makes
sense to us from a fee-charging standpoint and whose work involves our
practices, sectors and issues.
We
advise and represent our clients on business law deals, fights and questions of
all kinds and sizes, and, if we may say so, revel in the ones that are
creative, complex or critical – ideally, the ones that are at once creative,
complex and critical. We certainly cannot do every kind of work and absolutely
have no wish to.
What are some of the entry-points for businesses who
haven’t worked in Nigeria before but would like to?
 Businesses
that can ride on Nigeria’s demographics – most obviously food and other
“fast-moving consumer goods” — are perhaps the most promising. In the long-run
they are likely to do well regardless of what the political situation may be.
Businesses in regulated industries – for example, financial services,
telecommunications, oil and gas and electricity – are also likely to do well
because the regulators have been working hard to impose discipline on them.
What are some of the key considerations for such a
move?
 Fortitude
and creativity are important. In Nigerian business life, it is easy to get
discouraged by early failures and there are often no pre-set practices or
rules. One has to be resilient, and one often has to make the practices and
rules up as one goes along.
To what extent has the involvement of foreign business
investors led to the strengthening of legal institutions in Nigeria?
Only
to a very limited extent; Legal institutions are to a significant degree also
wielders of political power. Their destiny has therefore understandably always
been far more in the hands of Africans than in the hands of non-Africans.
How does corruption affect business interests in
Nigeria?
 Corruption
is deeply toxic and discouraging. Lawyers are its biggest victims. It makes
lawyers, and lawyering, irrelevant. Why hire a lawyer or care to go into the
minutiae of law when you can bribe somebody to get to the result that you seek?
How does the difficulty of exit affect investing in
Nigeria?
 I
am not sure that there is a difficulty of exiting. The law allows bona fide investors
freely to repatriate their income and their sales proceeds. There is no
guarantee of a favourable exchange rate at the moment of exit, but that is to
be expected and is not truly a difficulty of exit.
What are the sources of liquidity to finance an exit?
 US
Dollars bought from either the Central Bank or the interbank market have been
the usual sources.
Can equity and earnings be easily repatriated to the
investor’s country?
 Yes
Is Sub-Saharan Africa truly the next emerging market
for investors?
 Sub-Saharan
Africa is already emerging and should not be seen as the “next” emerging
market. I do not know enough about opportunities outside Africa to comment on
them with confidence.
What is the effect of the global economic crisis on
Sub-Saharan Africa, and what is its effect on existing portfolio companies and
future opportunities?
 The
crisis has made portfolio investors from the Western world more cautious about
investing in Africa than they would otherwise have been. In my view, the
declines in international commodity prices have been more damaging to
Sub-Saharan Africa than the crisis because they have meant that Government revenues
and access to foreign exchange have both fallen. But neither the crisis nor the
declines has meant that there is any shortage of opportunities. The
opportunities are still there. It is an abundance of those who are willing to
take them that is lacking.
What legal or policy changes would make investing in
Africa more attractive to funding sources?
Perhaps
the most critical changes are more punishment for corruption, more independent
judiciaries, stricter term-limits for rulers and better social services
(especially healthcare, education and transport infrastructure).
What are the most critical organisational and incentive
measures your firm took to ensure that your firm is able to strike a balance
between delivering practice, geography and industry expertise, while
maintaining client focus, high quality work and clear internal accountability?
We
have stuck to our core practices and sectors and maintained our hiring
policies, diversity and ISO 9001:2008 Certification. We have continually
strengthened our back office and technology, improved the quality of the
training and exposure that we provide, increased wages regularly and promoted
staff. One key point for the future is to do better at communication. We keep
hearing messages about us that are strange, based on a misunderstanding of the
facts or misleading information for example the ones in Q1 (size) and Q5 (ALN)
above.
I believe the strength of any organisation is in the
unity of purpose, but at the same time a diversity of personalities and
disciplines and expertise. With that as a background, in your estimation, who
makes the ideal candidate for your firm?
 We
are drawn to young lawyers who are hardworking, bright, sober and decent.
What can law students do, while students, to ready
themselves for a slot in your firm?
 Work
hard, get good exam results, remain sober and always act with decency.
What do you do outside the firm to enrich your life?
 Family,
friends, history and current affairs.
APPRAISAL OF THE NIPC PIONEER STATUS INCENTIVE REGULATIONS 2014 by Micheal Dugeri

APPRAISAL OF THE NIPC PIONEER STATUS INCENTIVE REGULATIONS 2014 by Micheal Dugeri


credits-www.google.com

Government in Nigeria has developed a
package of incentives for various sectors of the economy as a way of promoting
commerce and industry. One of such investment incentives is the Industrial
Development (Income Tax Relief) Act, Cap 17, LFN, 2004 (“IDITRA”), which grants
tax holidays to companies in industries that meet the conditions of being
designated Pioneer industries. Pioneer Status companies are exempted from
paying tax on their profits under the Companies Income Tax Act, for a stated
period of time. This is usually for a period of three years at the first
instance commencing on the production day.
 Section 1 IDITRA provides that
the President may declare any industry as a pioneer industry and its products
pioneer products, where he is satisfied that:

 any industry is not being carried
on in Nigeria on a scale suitable to the economic requirements of Nigeria, or
at all, or there are favourable prospects of further development in Nigeria of
any industry; or
1.     It is expedient in
the public interest to encourage the development or establishment of any
industry in Nigeria by declaring the industry to be a Pioneer industry and any
product of the industry a pioneer product.
 The Nigerian Investment Promotion
Commission (NIPC) sometime last year released the Pioneer Status Incentive
Regulations, with an effective date of 30 January 2014. The Pioneer Status
Incentive Regulations 2014 (“the Regulations”) have other requirements apart
from those in IDITRA for processing an application for Pioneer Status. The
Regulations were made pursuant to section 30 of the NIPC Act CAP. N117
LFN 2004. They set out the objectives and scope, as well as
processes/procedures guiding the application and issuance of the pioneer status
incentive. We shall examine key provisions in the Regulations and point out the
various legal issues they raise and the attendant implications.
 Application for a Pioneer
Status Incentive
Clause 3 (1) (2) of the Regulations
provides that an applicant for a Pioneer Status Incentive must:
1.     be a body corporate,
registered in Nigeria; and
2.     have incurred capital
expenditure of not less than N10 million.
 A filled application form
(obtainable for free) is to be submitted along with a list of requirements to
the NIPC. The list of requirements includes the following items:
1.     the relevant
regulatory license to operate in the sector or business activity where
applicable;
2.     tax clearance
certificate;
  • a
    copy of the NIPC registration certificate;
1.     evidence of payment
of a non-refundable processing fee of N200, 000.
 Some of the above requirements
are a radical departure from the provisions of IDITRA. The qualifying
requirements under IDITRA are that the applicant company must have been registered
in Nigeria and incurred a capital expenditure of not less than N50, 000 (in the
case of an indigenous-controlled company) or N150, 000, in the case of any
other company. More so, section 2 (4) IDITRA states that the applicant is
required to pay an application processing fee of N100 only. There is nothing in
IDITRA that empowers any authority to review the fees therein by regulations or
rules made pursuant to the Act.
What is more worrisome is the new
blanket requirement of NIPC Registration Certificate as one of the documents to
be submitted along with an application for pioneer status. Registration with
NIPC is provided under section 20 of the NIPC Act and it is for companies with
foreign participation. The provision does not apply to wholly indigenous-controlled
companies; whereas, the IDITRA applies to all companies doing business in
Nigeria. It would be absurd and cumbersome therefore, to subject all companies
seeking pioneer status to first register with NIPC. It would also add to the
cost of applying for pioneer status.        
Introduction of Service Charge
Part III of the Regulations introduced
a service charge to be paid by every company applying for the pioneer status
incentive. This is completely absent in IDITRA. The service charge is to be determined
by the NIPC at 2% of a company’s estimated tax savings, derived from five-year
financial projections. Where a company records losses in its projections, the
service charge is to be calculated on the higher of the following: 0.5% of its
net assets; or 0.25% of its turnover.
Clause 7 of the Regulations states that
a notification letter accompanied by an invoice would be issued by the NIPC
within two days of the determination of the service charge to the company. Upon
presentation of evidence of payment of the invoice amount, an approval letter
would then be issued to the applicant company, which is one of the documents to
be presented to the NIPC before a Pioneer Status Certificate is issued.
The introduction of the service charge
raises three issues: first, the fact that the levy is not contained in IDITRA
nor contemplated by it makes its imposition arbitrary. Secondly, it adds to the
cost of applying for pioneer status. Thirdly, the levy regardless of
profitability means that pioneer incentive may well result in additional cost
overall putting the affected companies in a worse situation than without the
incentive.
Other Provisions
The Regulations additionally provide
for a periodic impact assessment to be carried out by the NIPC, for the purpose
of evaluating the utilisation of the savings obtained from the Pioneer Status
Incentive; and extenuating circumstances (including but not limited to host
community hostility, natural disasters, strikes, and insurgency) where the
pioneer incentive may be suspended and the procedures to be followed to achieve
this. There is also provision for circumstances in which the pioneer status
certificate may be revoked. These provisions are essentially in tandem with
IDITRA.
Legal basis of the Regulations
The Regulations are made pursuant to
section 30 of the NIPC Act. Interestingly, section 30 of the NIPC Act gives the
NIPC powers to make regulations for the administration of the NIPC Act and not
for the administration of Pioneer Status Tax Incentive Regime, which is established
under the IDITRA. The legal basis for the Regulations may thus be challenged.
In fact, the NIPC is not statutorily empowered to administer pioneer status
incentives. The core legal mandate of the NIPC is the registration and
monitoring of foreign investments in Nigeria. The agency responsible for
administering pioneer status is the Federal Ministry for Industry. This is
pursuant to sections 2 and 25 IDITRA.
The argument that NIPC is a Parastatal
under the Federal Ministry for Industry and the Minister responsible  may
thus delegate his powers under IDITRA to it is simplistic. The NIPC is a
statutory body established by a law, which also defines its powers and
functions. There is need for a clear legal instrument enabling the NIPC to
perform functions not contained in its establishment law, and such legal
instrument should ordinarily form the basis for the Pioneer Status Incentive
Regulations and not the NIPC Act. This may require amendment to either the NIPC
Act or IDITRA.
Conclusion
The arguments in this paper against the
legality of the Pioneer Status Incentive Regulations 2014 are twofold: firstly;
the Regulations have a wrong legal basis. They are made pursuant to section 30
of the NIPC Act, whereas the principal legislation on Pioneer Status Incentive
is IDITRA. Although in practice, the NIPC is the government agency that issues
pioneer status and other investment incentives to any deserving company it is
legally wrong to base the Pioneers Status Incentive Regulations on the NIPC Act
rather than on the legal instrument under which the Minister for Industry may
have delegated his powers under IDITRA to the NIPC.
Secondly, certain clauses in the
Regulations materially contradict the IDITRA. It is argued that to the extent
that some clauses in the Regulations conflict with the principal legislation on
pioneer status incentive such clauses in the Regulations may be struck down by
the court in deserving situations. The law is trite that a subsidiary
legislation derives its authority from the principal enactment and a conflict
between the two must be resolved in favour of the latter. In the case of Nwanezie
v. Idris
(1993) 3 NWLR (Pt. 279) 1 at 16, the Supreme Court struck down
a rule of court which conflicted with a statutory provision on the same issue.
The apex court opined that a statutory provision is superior in status to a
regulatory rule made under statute. There is little to believe that the fate of
the Pioneer Status Incentive Regulations may be different if it is ever
challenged in court.  
Finally, much as one might argue
against the legality of the NIPC Regulations, it needs to be stated that IDITRA
is an old legislation, and some of its provisions are now obsolete. The Act
needs to be amended and its provisions streamlined to reflect present day
realities in the world of commerce and industry. 
ENTERTAINMENT AND POLITICS: STRANGE BED-FELLOWS by Kayode Omosehin

ENTERTAINMENT AND POLITICS: STRANGE BED-FELLOWS by Kayode Omosehin


Politics
in Nigeria is taking a new dimension as power has changed hands from one
political party to another. The new party is leaving no stone unturned in its
efforts to sustain/succeed itself in power. The entertainment industry is the
main focus to achieve the desired drive to control federal power in 2019 and
beyond. The entertainment industry secured not less than 42% of the efforts
that led to the emergence of the new political class in the last general
elections. Most political rallies could not have been merrier and fun-filled
except with super stars performing live on stage to a depressed population who
saw it as a free ticket out of boredom and depression. Political rallies were
music fiesta most times. 

Going
forward, the leading figures in the entertainment industry are now being made
political loyalists. Some of them get chieftaincy titles. Some get
ambassadorial contracts. Some get project contracts or national awards. Some
are appointed as Youths Coordinators with huge budgets. Some are simply
enlisted on the pay roll of their respective state governments. Some are
special purpose vehicles for back-channels and other confidential transactions.
All of them can now have audience with our political leaders. There is nothing
bad in youths or players in entertainment industry partaking in the national
politics. Non participation is worse. As a matter of fact, the government will
be incomplete without every sector ably represented. However the curious
roles/reasons for the engagement of our talented youths are worrisome. Politics
and entertainment are not the same and do not relate well particularly in this
country. They are strange bedfellows. 
Most
of the class of entertainers targeted by the politicians are young persons
whose experience in life is far less than what is required to survive the
dynamism and peculiarities of the murky Politics in Nigeria. The target class
cannot withstand the intrigues, blackmails, propaganda, assassinations, threats
and other ugly sides of the kind of politics in this country. For God’s sake,
the greater benefits of these entertainers lie in their talent. Let it remain
so! They ought to be shielded from the filth and corruption from which we are
still trying to extricate our government. Our chance of national redemption
from corruption, bad governance and sit-tight syndrome diminishes when the
political class can go to bed rest assured that they have what it takes to
secure (or compel) the loyalty of the leading figures in the talent industry,
which they can ultimately use to drive the depressed population in a particular
direction during elections. 
Politicians
will come to you whenever they see potentials in associating with you. They did
this to the Nigerian soldiers, dragging them into the country’s politics till
the soldiers lost their credibility and discipline for which they are most
identified world wide. The politicians are responsible for the absence of a vibrant
true civil society group in the country. Most of the peaceful protesters have
been infiltrated by the politicians to achieve a counter result of the planned
demonstration. Why? Because, all comrades are now paid by government or
government-connected big man. 
The politicians came to lawyers and judges. Apart
from using them to chase out the military, they dragged them into politics. The
lawyers and judges have been accused of corruption or aiding corruption again
and again by the same politicians. The latest came from the current president.
As much efforts the politicians have made to discredit the legal profession, it
is still about the only ally they consider a necessary evil. Can we say the
same about the young entertainers now being dragged into politics? When the
chips are down and the table is turned against these entertainers, can they
defend themselves? Is the entertainment industry stronger than the Military
which the politicians used, dumped and rubbished?
SUCCEEDING AS A 21ST CENTURY YOUNG LAWYER IN NIGERIA by Senator Ihenyen

SUCCEEDING AS A 21ST CENTURY YOUNG LAWYER IN NIGERIA by Senator Ihenyen

Credits-www.linkedin.com

Editor’s note: As posted on www.linkedin.com
In
Nigeria, thousands of young lawyers are unemployed. Each year, at least up to
3,000 new wigs will join their colleagues in the labor market. Add to this
growing number another army of young lawyers who are underemployed.
Most
underemployed lawyers remain so for years. Underemployment does not only affect
productivity but also professionalism. It is only a matter of time for many of
these unemployed and underemployed lawyers to lose confidence in themselves and
the legal profession.

The Challenge: Young lawyers should dare to break new
grounds
At
the last Bar Conference in Abuja, senior lawyers advised young lawyers to
embrace new areas of law or less developed areas of law. Telecom, Cyberlaw,
ADR, Intellectual Property and a few others were mentioned as some of the areas
young lawyers could explore. They believe (and rightly so) that young lawyers
should have competitive advantage in these areas
Good
advice. But has this been the case? I doubt.
Nigeria’s legal marketplace needs innovation
Legal
practice in Nigeria is still in the 3rd world. The legal environment in the
country is not friendly. Government has not demonstrated that it has any vision
to bring change to the legal industry, particularly the empowerment of new wigs
from Law Schools. A Law School graduate badly needs innovative policies and
programs that ensure sustainable structural support for a solid foundation and
successful legal career. In the UK and US, solo practice and virtual-law firm
programs form part of many Law School curricula. In Nigeria, it is virtually
discouraged.
Nigerian Bar Association (NBA) should introduce fresh
ideas to create opportunities for young lawyers.
NBA’s
approach may not also be helping matters. I think NBA’s focus on strengthening
the body and not the members of the body has ensured that the most important
things remain at the bottom of its to-do list. NBA needs to drive innovation
that stimulates and supports growth in the legal industry and deepen legal
practice towards creating opportunities for young lawyers. This is how the
future of the legal profession can be assured. Hopefully, the present NBA
leadership is going to get it right.
Senior lawyers should encourage and support young
lawyers with new ideas.
Apart
from the Government and NBA, senior lawyers hardly give young lawyers the
support they need to grow the confidence to start something new. The old order
is the precedent. To go against precedent is to challenge the noble profession.
Yet, a few young lawyers who challenged the old order have established some of
the most successful and innovative legal-services businesses in Nigeria. I have
described them as legal-services businesses because while some are still in
legal practice others service the legal community. The legal marketplace often
needs a mix of the old and the new to meet the needs of the 21st century. This
is how the legal industry grows and develops anywhere in the world.
Before robots take over the legal industry, young
lawyers should embrace technology, explore ideas, and connect.
I
think young Nigerian lawyers need to be more creative, enterprising, and
industrious. As lawyers, our catholic, eclectic, and interdisciplinary orientation
should enable us open our minds to new learning and opportunities not make us
learned robots. With the advancement in robotic technology today, learned robots will soon
become extinct. This is because the real robots are coming; some are already
with us.
I
think young lawyers should embrace Internet technology. The Internet provides
boundless opportunities for professional development. Young lawyers must open
their minds to new ways of doing things and take the lead in innovation. Young
lawyers must network and collaborate. Use a professional platform like LinkedIn
to connect with people in your industry or growing area of expertise.
Continuing Professional Development is also very
essential for the 21st century young lawyer to succeed.
I
dare young lawyers to have the courage to keep learning. When the opportunities
come (or you create the opportunities yourself), preparation would count. By
being prepared, you will be ready to take on the world, establishing yourself
as a 21st-century solution in the legal marketplace.
The
future is now. Let’s take it.
By: Senator Ihenyen

 

CRIMINAL LIABILITY FOR SPREADING AIDS

CRIMINAL LIABILITY FOR SPREADING AIDS

Photo Credits- www.nakedlaw.avvo.com

As we look back to the
celebration of the World’s AIDS day on 1/12/2015 and as we sympathize with
Charlie Sheen who recently disclosed his HIV status, there is an issue which I
believe must be very instructional to us. 
What happens if a person
who is infected with HIV has unprotected sexual intercourse with another
without disclosing his/her status. Should this act be considered as a crime? 

In 2014, there were over
three million people living with HIV in Nigeria according UNAIDS and regarding
the aggressive nature of the virus and lack of a downright cure, not to mention
the mental and emotional stress that comes from being diagnosed with HIV, I
believe it must be classified as a crime to intentionally inflict another with
such turmoil, especially if same could have been prevented. Isn’t it time we
had legislation to prohibit this?
In the United State, Charlie
Sheen, the famous Hollywood actor may be prosecuted in court for the act of
“willful exposure” because he may have had unprotected sexual relations without
informing them of his status. The law in California is clear that anyone with a
communicable disease who willfully exposes another is guilty. Basically, it is
a crime for someone to have unprotected sex when that person knows he or she is
infected with HIV without informing the other sex partner. 
This leads to the
question, how many people are going about willfully spreading communicable diseases
in Nigeria especially HIV? And what is the government framework in place to
prohibit or punish such an act? 
I will suggest that the
Nigerian Senate and respective House of Assemblies prepare a code on Health and
Safety which will provide to prohibit such willful acts of exposure to HIV and
other communicable diseases the transmission of which is a threat to public
health and safety. 
For instance, by virtue of
the California Health and Safety Code 120290: Willful Exposure to Infectious
Diseases, it is a misdemeanor for you to willfully expose yourself to another
person if you are afflicted with a disease that is contagious, infectious or
communicable, or to willfully expose another person who is afflicted with a
disease to another person. The crime does not require that you intended to
infect another person. All that is required is that you willfully engage in
activity that you knew or reasonably should have known there was a risk that
you could spread the disease to the alleged victim. 
I believe Nigeria is in
need of such a provision in our law and same must be passed as soon as
possible.  If you believe same, why not
put a proposal through to your representative at the State and Federal levels. 
Adedunmade
Onibokun
@adedunmade