On Monday, 27 June 2022, the Federal High Court (FHC or “the Court”) sitting in Abuja ruled in Accugas Limited (Accugas or “the Company” or “the Plaintiff”) and Federal Inland Revenue Service (FIRS) & Attorney General of the Federation (AGF), collectively referred to as (“the Defendants”) that the FIRS acted unlawfully by applying the provisions of Finance Act, 2019 (“FA 2019” or “the Act”) to transactions, activities and periods that occurred before the 13 January 2020 effective date of the Act.

The FHC further held that a statute should not be given a retrospective effect except where its language intends the statute to operate retrospectively. Therefore, since the provisions of the Act did not expressly provide for a retrospective application of the amendments introduced therein, the FIRS acted unlawfully by extending its scope to matters that had occurred before its commencement date.

Facts of the case

Prior to the enactment of FA 2019, Section 33(3)(b) of the Companies Income Tax (CIT) Act exempted companies with at least 25% imported equity capital from paying minimum tax. However, Section 14 of FA 2019 deleted this provision and replaced it with a new provision exempting small companies with an annual gross turnover of less than ₦25 million from tax.

Accugas is a Nigerian Company with 99.9% imported equity capital held by Exoro Holding BV, a company incorporated in the Netherlands. Following the enactment of the Act, the Company wrote to the FIRS to clarify if the deletion of Section 33(3)(b) of the CIT Act by FA 2019 will affect its right to enjoy exemption from minimum tax on its 2020 year of assessment (YOA) tax returns, which is based on income earned from 1 January to 31 December 2019. The FIRS informed the Company that it was ineligible to claim the exemption based on the amendments introduced by FA 2019. To avoid imposition of penalty and interest for non-payment of minimum tax by the FIRS, the Company filed its tax return for 2020 YOA and settled the minimum tax liability of US$609,178.00 using its available withholding tax credits. However, Accugas subsequently filed an appeal before the FHC to seek among other reliefs, a declaration that it was entitled to a refund of the US$609,178.00 used to offset its alleged minimum tax liability for 2020 YOA.

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