The Tax Appeal Tribunal (TAT or "the Tribunal") sitting in Lagos recently ruled in the case between Checkpoint Software Technologies B.V Nigeria Limited (CST or “the Company” or “the Appellant”)and Federal Inland Revenue Service(FIRS or “the Service” or "the Respondent") that the Income Tax Country-by-Country (CBC) Regulations, 2018 was not made by a legally constituted Board of the FIRS in accordance with the provisions of Section 61 of the FIRS (Establishment) Act, 2007 (FIRSEA), rendering it illegal, unconstitutional and void. Consequently, the administrative penalties for non-compliance with the provisions of the CBC Regulations, 2018 are invalid and unenforceable.

Facts of the case

In March 2022, the Appellant received notices of administrative penalties for late filing of its 2019 and 2020 CBC notifications as stipulated in the CBC Regulations, 2018. CST objected to the penalties noting that they were illegal, invalid and beyond the authority granted to the FIRS in the FIRSEA. However, the Respondent refused to withdraw the notices.

Consequently, the Appellant initiated an appeal before the TAT, asserting that the Respondent's action to impose penalties for alleged late filing or non-filing of CBC notifications was beyond the scope of delegated legislative powers of the FIRS Board under Section 61 of the FIRSEA. Therefore, Sections 11 to 13 of the CBC Regulations, 2018 that seek to impose different penalties for non-filing or late filing of CBC notification are illegal, ultra vires and in violation of the provisions of the FIRSEA –an Act of the National Assembly that established the Respondent.

CST’s Argument

The Appellant argued that the FIRSEA established the FIRS Board, its tenure and powers conferred on it. Under Section 61 of the FIRSEA, the National Assembly granted the FIRS Board powers to make subsidiary Regulations, subject to the approval of the Minister of Finance. The FIRS Board was dissolved in 2012 and was only reconstituted in January 2020. During this period, the appointed Executive Chairmen of the FIRS managed the affairs of the Service. Further, the CBC Regulations were issued in February 2018, which was during the period that the FIRS had no constituted Board. Therefore, the Regulations were not approved by the Board of FIRS as required in the FIRSEA.

The Appellant also asserted that the principal legislation, the FIRSEA, did not establish exceptions nor grant the Board the right to sub-delegate its power to formulate Regulations. Therefore, the delegated legislative power can only be rightfully exercised by the Board, without sub-delegation to other parties. The Appellant further noted that the Country-by-Country Multilateral Competent Authority Agreement (CBC MCAA), a global multilateral accord, requires the ratification of the National Assembly as mandated by Section 12 of the Constitution of the Federal Republic of Nigeria, 1999 (“the Constitution”) to be enforceable in Nigeria.