The Tax Appeal Tribunal (TAT or “the Tribunal”) Lagos Zone has held, in the case between Investment Holdings Limited (“IHL” or “the Company” or “the Appellant”) and Federal Inland Revenue Service (“FIRS” or “the Service” or “the Respondent”), that the FIRS is empowered by law to administer and collect Withholding Tax (WHT) as an advance payment of income tax. The TAT also clarified that WHT is not another type of tax different from the companies income tax (CIT). Rather, it is a form or structure of an advance collection of CIT.
Further, the Tribunal reaffirmed the subsidiary legislative function vested in the Minister of Finance (MoF), under the CIT Act (as amended), to issue regulations for the administration of the WHT regime.
Facts of the case
In 2020, FIRS conducted a tax audit exercise on IHL’s tax and accounting records for the 2013 to 2018 tax years. Following the audit exercise, FIRS raised additional WHT assessments of ₦95,832,255.85 for the relevant tax years. The Appellant disputed the WHT assessments. However, it made a payment of ₦3,904,214.40, which it alleged was for Tertiary Education Tax (TET) liability and not a part payment of the additional WHT liability assessment.
Dissatisfied with the FIRS’ position regarding the WHT assessments, the Company filed an appeal before the TAT on 29 April 2022 and sought the following reliefs:
a. A declaration that the charge and collection of WHT by the Respondent is unconstitutional as WHT is not listed under the exclusive list of taxes to be collected by the Federal Government of Nigeria (FGN) by virtue of items 58 and 59 of Part I of the Second Schedule to the Constitution of the Federal Republic of Nigeria 1999 (as amended) (“the Constitution”)
b. A declaration that the Respondent lack (sic) the power to amend the CIT Act Cap C21 Laws of the Federation (LFN) 2004 (as amended) by extending the coverage of WHT to include all aspect (sic) of building, construction and related services, contract and agency arrangement, consultancy, technical and professional services, contrary to the provisions of Sections 78, 79 and 89 of CIT Act
c. An order setting aside paragraph 3.0 of the FIRS’ letter of intent (LOI/T13) dated 8 December 2020, together with the relevant WHT assessment demand notes, all dated 8 December 2020.
In response, the FIRS raised a Preliminary Objection (PO) challenging the jurisdiction of the TAT to entertain the appeal on grounds that it did not pertain to a dispute or controversy arising from the operations of the FIRS (Establishment) Act, 2007 (FIRSEA) as prescribed by Section 59(1) and Paragraph 11(1) of the Fifth Schedule to the FIRSEA. The Tribunal, in its ruling on 6 August 2022, dismissed the PO and ordered the parties to file their final written addresses on the issues.
IHL’s argument
IHL argued that the powers granted to the FIRS to administer revenue (taxes) accruable to the FGN under Section 2 and Item 9 of the First Schedule to the FIRSEA were restricted to specific taxes enumerated in items 58 and 59 of Part I of the Second Schedule to the Constitution (i.e., the Exclusive Legislative List). Given that WHT is not explicitly listed in the Constitution as one of the applicable taxes, the Respondent’s WHT demand notices and letter of intent were unconstitutional, ultra vires, null and void.
