TAT rules that Insurance Companies are subject to excess dividend tax rule in CITA

The Lagos zone of the Tax Appeal Tribunal (TAT) recently issued a ruling in the case involving FBN Insurance Limited (FBN or “the Company” or “the Appellant”) and Federal Inland Revenue Service (FIRS or “the Respondent”). The TAT has ruled that insurance companies are not only liable to tax under Section 16 of the Companies Income Tax Act (CITA) but also subject to other non-conflicting provisions of CITA.

The Respondent conducted a tax audit exercise on the Company’s 2016 and 2017 financial records, resulting in an additional Companies Income Tax (CIT) assessment of ₦917,234,580 (Nine Hundred and Seventeen Million, Two Hundred and Thirty-Four Thousand, Five Hundred and Eighty Naira) only. Additionally, the Company was assessed to Withholding Tax (WHT) liabilities, inclusive of interest and penalties, on the following transactions:

• Commission on premiums amounting to ₦112,987,000 (One Hundred and Twelve Million, Nine Hundred and Eighty-Seven Thousand Naira) and ₦34,008,000 (Thirty-Four Million and Eight Thousand Naira), for 2016 and 2017 financial years, collected by First Bank of Nigeria Limited (FBN Ltd), on behalf of the Company in respect of life insurance policies taken by the customers of FBN Ltd.
  
  
• Amortized repayment of rent in the total sums of ₦106,047,000 (One Hundred and Six Million and Forty-Seven Thousand Naira) and ₦74,731,000 (Seventy-Four Million, Seven Hundred and Thirty-One Thousand Naira) paid by FBN Ltd to Scandirect Ltd for the premises occupied by the Company during the period under review.
  
  
• Reimbursable expenses amounting to ₦49,531,000 (Forty-Nine Million, Five Hundred and Thirty-One Thousand)
  
  
• Professional fees amounting to ₦160,865,000 (One Hundred and Sixty Million, Eight Hundred and Sixty-Five Thousand) and ₦53,980,000 (Fifty-Three Million, Nine Hundred and Eighty Thousand) paid to FBN Capital Management Limited (FBN Capital).

The Appellant duly objected to the assessments on the basis that the FIRS failed to consider various aspects of its business. Despite the Company’s objection and clarifications, the Respondent refused to discharge the additional liabilities and subsequently issued a Notice of Refusal to Amend (NORA). Dissatisfied with the Respondent’s position, FBN filed an appeal before the TAT, seeking to have the liabilities set aside.

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