Tax Disputes Comparative Guide -

Compare this Guide in other jurisdictions?

1 Legal framework

1.1 Which laws govern taxation and tax disputes in your jurisdiction?

The laws which govern taxation and tax disputes in Nigeria include:

the 1999 Constitution of the Federal Republic of Nigeria;
the Companies Income Tax Act, 1977;
the Personal Income Tax Act, 1993;
the Stamp Duties Act, 1939;
the Value Added Tax Act, 1993;
the Capital Gains Tax Act, 1967;
the Petroleum Industry Act, 2021;
the Petroleum Profits Tax Act, 1958;
the Deep Offshore and Inland Basin Production Sharing Contract Act, 1999;
the Tertiary Education Trust Fund (Establishment, Etc) Act, 2011;
the Industrial Training Fund Act, 1971;
the Casino Taxation Act, 1965;
the Nigerian Police Trust Fund (Establishment) Act, 2019;
the National Agency for Science and Engineering Infrastructure Act 1992;
the Nigerian Minerals and Mining Act 2007;
the Venture Capital (Incentives) Act;
the Startup Act 2022;
the Finance Act 2019;
the Finance Act 2020;
the Finance Act 2021; and
the Finance Act 2023.

The following laws govern tax disputes:

the 1999 Constitution;
the Federal Inland Revenue Service (Establishment) Act, 2007;
the Federal High Court Act;
the Court of Appeal Act;
the Supreme Court Act; and
the Evidence Act.

1.2 Do any other regional, national or supranational rules or regulations have relevance in this regard?

Yes. Nigeria is a signatory to the following regional and supranational agreements which are relevant to tax disputes in Nigeria:

the Multilateral Competent Authority Agreement on Country-by-Country Reporting;
the Common Reporting Standard – Multilateral Competent Authority Agreement;
the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting;
double taxation agreements with 16 countries (Belgium, Canada, China, the Czech Republic, France, Italy, the Netherlands, Pakistan, Philippines, Romania, Slovakia, Singapore, South Africa, Spain, Sweden and the United Kingdom);
the Double Taxation Agreement of the Economic Community of West African States; and
the African Continental Free Trade Agreement.

In relation to national rules, regulations and orders, the following are also relevant to tax disputes:

the Tax Appeal Tribunal (Procedure) Rules, 2021;
the Federal High Court (Tax Appeal) Rules, 2022;
the Court of Appeal Rules 2021;
the Supreme Court Rules 2024;
the Income Tax (Transfer Pricing) Regulations, 2018;
the Income Tax (Country-by-Country Reporting) Regulations, 2018. However, the Tax Appeal Tribunal has held that these regulations are unconstitutional, null and void (Appeal TAT/LZ/CIT/121/2022; Check Point Software Technologies BV Nig Ltd (Check Point) v Federal Inland Revenue Service);
the Income Tax (Common Reporting Standard) Regulations, 2019;
the Significant Economic Presence Order, 2020;
the Deduction at Source (Withholding) Regulations 2024; and
the Value Added Tax (Modification) Order, 2024.

1.3 Which authorities are responsible for enforcing the tax laws? What is their general approach to enforcement?

In Nigeria, the authorities primarily responsible for enforcing tax laws are:

the Federal Inland Revenue Service (FIRS);
the Federal Capital Territory Internal Revenue Service (FCT-IRS);
the state internal revenue services (SIRS) of the various states; and
the local government revenue committees.

FIRS: The FIRS is responsible for enforcing the following taxes:

petroleum profits tax;
companies income tax;
value-added tax;
personal income tax of:
- non-residents;
- members of the Armed Forces;
- police; and
- officers of Nigerian foreign service;
tertiary education tax;
capital gains tax (companies only); and
stamp duties on instruments executed by companies.

FCT-IRS and SIRS: The FCT-IRS and the SIRS of the various states are responsible for enforcing the following taxes:

personal income tax of residents of their respective states;
stamp duties on instruments executed by individuals in their respective states;
withholding tax in respect of individuals and unincorporated bodies in their respective states;
capital gains tax (individuals and unincorporated bodies);
pools betting and lotteries, gaming and casino taxes;
road taxes; and
other taxes that states may impose.

Local government revenue committees also enforce certain levies and rates, including:

shops and kiosk rates;
tenement rates; and
marriage, birth and death registration fees.

Approach to enforcement: The tax authorities enforce taxes through various means, including:

civil actions to recover outstanding taxes;
criminal prosecution for tax evasion; and
distraint of taxpayers' properties pursuant to a high court order.

1.4 To what extent do the tax authorities cooperate with (a) other national authorities and (b) their international counterparts in enforcing the tax laws? Does this vary depending on the applicable tax?

Cooperation with national authorities: Federal and state tax authorities cooperate with each other under the aegis of the Joint Tax Board to ensure the efficient and uniform administration of all tax laws.

Also, on 6 February 2023, the FIRS and the Lagos State Internal Revenue Service signed a memorandum of understanding to establish a joint audit and investigation team comprising members of both services for the purpose of:

exchanging information; and
jointly executing tax audits and investigations.

Tax authorities also cooperate with regulatory bodies and financial institutions for the purpose of obtaining information to ensure tax compliance.

Cooperation with international counterparts: The Nigerian tax authorities cooperate with their international counterparts to enforce tax laws, especially pursuant to the following international instruments:

the Multilateral Convention to Implement Tax Treaty-related Measures to Prevent Base Erosion and Profit Shifting;
the Multilateral Competent Authority Agreement for the Common Reporting Standard; and
the Multilateral Competent Authority Agreement for the Automatic Exchange of Country-by-Country Reports.

2 Tax investigations

2.1 How do the tax authorities monitor compliance with the tax laws? Does this vary depending on the individual taxpayer or the applicable tax?

The tax authorities monitor taxpayers' compliance with tax laws through various means, including:

desk examination and monitoring exercises;
audits; and
investigations.

This does not vary depending on the individual taxpayer or the applicable tax.

2.2 What typically triggers a tax investigation in your jurisdiction?

There are no statutory triggers for tax investigations at either the federal or state level. However, with respect to taxes administered by the Federal Inland Revenue Service (FIRS), the FIRS guidelines dealing with tax audits and investigations published in October 2023 provide that a tax investigation by the FIRS Tax Investigation Department can be triggered by the following:

fraud-related cases referred by tax audit teams;
failed tax audit exercises;
inconsistent financial statements;
failure to file tax returns;
discrepancies in the taxpayer's lifestyle;
unexplained losses;
resistance to tax audits;
persistent low tax-to-turnover ratio for three years;
deliberate/fraudulent understatement of income or overstatement of costs;
manipulation of accounting for business combinations and restructuring;
the disguising of equity as debt;
the discovery of abusive tax schemes;
publication of profits that are not in harmony with tax returns;
complex transactions with related parties, such as special purpose entities that are structured to misrepresent the financial position or the financial performance of the entity;
boardroom squabbles among shareholders;
money laundering (the unjustifiable movement of large sums of money); and
any other triggers that the tax authorities may deem appropriate.

2.3 What is the limitation period for commencing a tax investigation in your jurisdiction?

There is no limitation period for commencing a tax investigation in Nigeria.

However, the issuance of tax assessments is subject to a six-year limit unless the taxpayer is found to have committed fraud, wilful default or neglect. This limitation may be extended in such cases, allowing the tax authorities to issue assessments beyond the standard six-year period.

2.4 How does a tax investigation typically unfold in your jurisdiction?

A tax investigation in Nigeria typically unfolds as follows:

Commencement of the investigation: The tax authorities:
- formally inform the taxpayer of their intention to investigate; and
- outline the taxpayer's rights and obligations in this regard.
Gathering of information: The tax authorities obtain:
- information relevant to the investigation, such as financial and non-financial records, books and accounts; and
- other important data from the taxpayer and third parties, where required.
Conduct of interviews and on-site visits: The tax authorities may also conduct interviews with the taxpayer and other relevant third parties, as well as on-site visits to the taxpayer's premises, to obtain further information.
Analysis and assessment of information: The tax authorities conduct a comprehensive examination and analysis of the collated records to:
- assess compliance with the applicable tax laws;
- identify irregularities; and
- calculate potential tax liability.
Preparation of a report: The tax authorities prepare a detailed report outlining the investigation's findings. The taxpayer is subsequently informed of the results and afforded an opportunity to provide an explanation regarding the identified findings.
Issuance of notice of assessment and demand notice: Where the investigation findings reveal that the taxpayer has yet to settle any outstanding tax, the tax authorities will issue a notice of assessment or demand notice to the taxpayer for payment of the tax.
Prosecution of tax offence: If the investigation reveals the commission of a tax offence, the tax authorities will charge the taxpayer with the offence.

2.5 What is the typical timeframe for the investigation?

A tax investigation can span several months to years, depending on several factors, including:

the nature of the offence;
the nature of the taxpayer's business or affairs;
the availability of information and evidence; and
the level of cooperation from the taxpayer and third parties involved in the investigation.

2.6 What powers do the tax authorities have in conducting their investigation, in relation to (a) the taxpayer itself, (b) its employees and (c) third parties?

The Federal Inland Revenue Service (Establishment) Act grants the FIRS unrestricted access to all lands, buildings, premises, books and documents that are necessary or relevant to the collection of any tax, including those that are:

stored or maintained in digital, magnetic, optical or electronic format; and
within the control of:
- the taxpayer;
- its employees; or
- third parties.

However, the FIRS must issue a seven-day notice before requiring a taxpayer, its employees or third parties to:

appear before an officer of the FIRS; or
provide relevant books, documents and information.

2.7 On what grounds, if any, can taxpayers refuse to disclose commercial information during the investigation?

Taxpayers cannot refuse to disclose any information requested by the tax authorities to obtain full information concerning the taxation of a taxpayer.

The tax authorities, however, have a duty to keep confidential information that is disclosed to them in the process of a tax investigation. The disclosure of such information by an officer of the tax authorities is punishable with:

imprisonment for a term not exceeding three years; or
a fine not exceeding NGN 200,000.

2.8 Can the taxpayer object to or challenge the tax investigation? Are any other avenues available for resolving the matter?

No. A taxpayer cannot object to or challenge a tax investigation.

However, in the course of a tax investigation, if the tax authorities misconstrue any information in a taxpayer's records in their findings, the taxpayer may flag the errors and point the tax authorities to the correct position.

A taxpayer can file a petition to the head of the relevant tax authority against the conduct of a tax investigation if it is of the view that:

the investigation:
- is unfair;
- is in bad faith; or
- violates the taxpayer's rights; or
the investigators have engaged in misconduct during the investigation.

In addition, the taxpayer may pursue legal action, including seeking judicial review of the investigation process.

2.9 What actions can the tax authorities take if the taxpayer does not cooperate in the investigation?

The tax authorities can pursue criminal action in a competent court against a taxpayer that refuses to cooperate with a tax investigation. If found guilty, the taxpayer may be liable to pay a fine equivalent to 100% of the amount of any unpaid tax liability.

2.10 Can the tax authorities exercise discretion in their treatment of the taxpayer in exceptional circumstances (eg, insolvency)?

The tax authorities have the flexibility to use discretion when dealing with taxpayers, particularly in extraordinary situations where a taxpayer faces financial constraints that prevent it from fulfilling its outstanding tax liabilities. In these instances, the tax authorities may choose to take a more lenient stance on tax enforcement. This could involve measures such as:

granting extensions;
waiving or reducing penalties; and
permitting instalment payments.

2.11 Do tax authorities have any leeway to settle in the course of tax investigations?

Yes, the tax authorities have discretion to explore settlement with taxpayers at any stage of a tax investigation.

2.12 If the investigation concludes that taxes are overdue, what powers do the tax authorities have to collect them? Does this vary depending on the applicable tax?

Where a tax investigation reveals overdue taxes, the tax authorities can:

pursue legal action to recover them; and
seek a court order to distrain the taxpayer's assets to settle the outstanding tax liability.

This power does not vary depending on the applicable tax.

2.13 On what grounds are penalties imposed and how are these calculated?

Penalties may be imposed in the following circumstances:

failure to pay tax;
late payment of tax;
failure to deduct withholding tax;
failure to remit tax withheld;
failure to collect and remit tax;
filing of incorrect tax returns;
failure to file tax returns;
late filing of tax returns; and
failure to comply with the notices, rules, regulations, guidelines or circulars issued by the tax authorities, in respect of an international tax treaty or other exchange of information obligation.

In some cases, these penalties are fixed amounts; in other cases, they are based on the tax liability.

2.14 On what grounds is interest levied and how is this calculated?

In addition to the penalties referred to in question 2.13, interest may accrue on unpaid or unremitted tax:

In some cases, interest on unpaid or unremitted tax accrues at:
- the prevailing minimum rediscount rate of the Central Bank of Nigeria (currently 27.25%); plus
- a spread determined by the minister of finance (currently 5%).
In other cases, it accrues at:
- the bank base lending rate; or
- the prevailing commercial rate.

2.15 What defences are typically available to the taxpayer?

The defences typically available to a taxpayer include the following:

The taxpayer has already paid the tax being demanded;
The income or activity in question is not subject to tax under the relevant law;
The income is either exempt from tax or deductible under applicable provisions of the relevant law;
The tax authorities have erroneously calculated the taxpayer's tax liability;
The tax authorities have incorrectly interpreted or applied a provision of the relevant tax legislation;
The taxpayer has been taxed twice on the same income where a double taxation agreement applies; or
The tax authorities do not have the authority to impose or collect the tax in question.

2.16 Can the results of the tax investigation have criminal implications for the taxpayer? Does this vary depending on the individual taxpayer?

Yes. A tax investigation may result in the prosecution of a taxpayer for a tax offence such as:

failing to deduct tax or remit tax deducted;
making false declarations or statements;
counterfeiting/falsifying documents;
using collected withholding tax for personal use;
filing false tax returns; or
committing tax fraud.

Where a tax investigation reveals the commission of an offence, the taxpayer may face prosecution. Upon conviction, the taxpayer may be sentenced to imprisonment, fined or both. In the case of a firm, association or corporate body, while fines may be imposed directly on the entity, the tax authorities are empowered to prosecute:

individuals who are responsible for the entity's management, such as directors, managers, secretaries, partners or officers; and
any person acting on its behalf.

If found liable and convicted, these individuals may also face terms of imprisonment.

2.17 If the tax investigation has criminal implications for the taxpayer, are the answers to any of the above questions different?

No.

3 Voluntary disclosure and amnesties

3.1 Are any voluntary disclosure or amnesty programmes applicable in your jurisdiction? Does this vary depending on the applicable tax?

Nigeria currently does not have an active voluntary disclosure or tax amnesty programme. However, it has previously implemented several such initiatives to encourage tax compliance. These programmes provided taxpayers with the opportunity to regularise their tax affairs without incurring penalties or interest.

4 Forum for tax disputes

4.1 In what forum(s) are tax disputes heard in your jurisdiction? Is there any choice of forum available?

The Tax Appeal Tribunal (TAT) is authorised to adjudicate tax disputes arising from the administration of:

companies income tax;
personal income tax;
petroleum profits tax;
value-added tax;
capital gains tax;
education tax;
withholding tax; and
other taxes imposed by an act of the National Assembly.

Decisions of the TAT can be appealed to:

the Federal High Court;
then the Court of Appeal; and
ultimately, the Supreme Court.

The Federal High Court adjudicates other tax disputes concerning the federal government's revenue; while the high courts of the respective states are responsible for adjudicating:

disputes relating to the administration of state taxes; and
other tax disputes concerning state revenue.

4.2 Who is the fact finder in a tax dispute? Does this change based on venue?

When a tax dispute is before the TAT, the panel of the TAT acts as the fact-finding body.

In cases initiated at the high court or the Federal High Court, the presiding judge serves as the fact-finding body.

5 Filing a tax dispute

5.1 What is the limitation period for filing a tax dispute in your jurisdiction?

A taxpayer that disagrees with a decision or action of the tax authorities has 30 days from receipt of the notice regarding such action or decision to file an appeal with the TAT. However, the TAT reserves the right to consider an appeal even after this 30-day period if it deems that there was a valid reason for the delay.

5.2 What are the formal requirements for filing a tax dispute?

Tax disputes at the Tax Appeal Tribunal (TAT) are commenced by filing a notice of appeal against the action or decision of the Federal Inland Revenue Service (FIRS). The notice of appeal is the formal document that marks the commencement of the appeal process at the TAT. The notice of appeal must:

comply with the TAT Rules; and
be accompanied by the following:
- a list of witnesses to be called at the hearing in support of the taxpayer's case;
- written statements on oath of the witnesses outlining the facts from the taxpayer's perspective; and
- copies of documents to be relied on at the hearing as evidence supporting the taxpayer's case (eg, financial statements, correspondence with the tax authorities).

The taxpayer must:

pay the applicable filing fees as assessed by the TAT; and
file a deposition confirming the payment of any undisputed tax.

5.3 What are the procedural and substantive requirements for filing a tax dispute?

The procedural requirements for a tax dispute involve:

filing a notice of appeal using Form TAT 1A within 30 days of the tax authorities' action, decision, assessment or demand notice; and
paying the prescribed filing fees.

Once filed, the notice of appeal is served on the tax authorities, which have 30 days from the date of service to submit a reply using Form TAT 3 to the secretary of the TAT.

Upon receiving the tax authorities' reply, the secretary will:

record this response in the cause book; and
serves the reply on the appellant.

Following the chairperson's direction, the secretary will schedule a hearing date for the appeal and serve hearing notices on the parties. The trial is then conducted, after which the parties submit their final addresses within the timeframe set by the TAT. Judgment is subsequently delivered within six months of commencement of the trial.

The substantive requirements for a tax dispute include presenting valid grounds for the appeal. The taxpayer must clearly establish a legitimate basis for the dispute, such as:

errors on the part of the tax authorities;
invalidity of the assessment under tax law; or
the applicability of statutory exemptions.

5.4 Is there any possibility for collective proceedings (eg, involving several taxpayers or multiple tax assessments)?

The TAT Rules permit the consolidation of tax appeals where multiple notices of appeal:

pertain to the same matter;
involve different parties with related interests; or
address substantially similar issues.

However, given the individualised nature of tax assessments, the practical application of consolidation in tax appeals is likely to be limited.

5.5 Must the sum in contention be paid into court before a tax dispute is filed?

The TAT Rules require taxpayers to deposit 50% of the disputed amount into an account designated by the TAT as security for prosecuting an appeal. The Federal High Court (Tax Appeal) Rules also require taxpayers to deposit 100% of the tax liability appealed against into an interest-yielding account maintained by the chief registrar of the court.

However, these requirements were declared unconstitutional, null and void by the Federal High Court in FHC/ABJ/CS/12/2022; Joseph Bodunrin Daudu, SAN v Minister of Finance, Budget and National Planning. Until this judgment is overturned on appeal, the requirement to deposit security no longer applies.

5.6 Has the filing of a tax dispute any effect on the payment of tax or the collection possibilities for the authorities?

The payment or collection of tax is suspended while a tax dispute is being resolved. However, the TAT may order a taxpayer appealing an assessment to pay to the FIRS a sum equal to the lesser of:

either:
- half of the disputed tax; or
- the tax paid in the previous year; plus
an additional 10% of the sum.

This order may be made only if:

the taxpayer has not filed returns;
the FIRS sufficiently demonstrates that the appeal is frivolous, vexatious or an abuse of the appeal process; or
other circumstances make it expedient to require payment as security for pursuing the appeal.

5.7 If the tax dispute is decided in favour of the authorities, is late interest due if the tax has not been settled? If the tax dispute is decided in favour of the taxpayer and the tax had already been settled, is interest due by the state?

If a tax dispute in Nigeria is decided in favour of the tax authorities and the taxpayer has not settled the disputed amount, interest and penalties will apply to the unpaid tax. This means that, in addition to the principal tax liability, the taxpayer may owe interest from the original due date until the tax is paid.

However, if the dispute is resolved in favour of the taxpayer and the tax has already been paid, the tax authorities are not required to pay interest when refunding the disputed tax.

6 Disclosure and privilege

6.1 What rules apply to disclosure in your jurisdiction? Do any exceptions apply?

Taxpayers in Nigeria are required to disclose all relevant information accurately and promptly to the tax authorities. This includes:

income;
expenses;
assets;
liabilities; and
any other information necessary for the assessment and collection of taxes.

However, under the Rules of Professional Conduct for Legal Practitioners, 2023 and the Evidence Act 2011, oral and written communications between lawyer-client in the course of professional employment are considered privileged information and are generally protected from disclosure, except where:

the client consents;
the information is intended for an illegal purpose;
disclosure is required by law or a court order; or
the information relates to the commission of a crime or fraud.

6.2 What rules on third-party disclosure apply in your jurisdiction?

The tax authorities in Nigeria have the legal authority to request and access information from third parties that may be relevant for tax assessment or audit purposes. These include:

banks;
financial institutions;
employers;
suppliers;
customers; and
other entities that may hold information related to a taxpayer's:
- income;
- transactions; or
- financial affairs.

Third parties that receive a request for information from the tax authorities must generally comply with such requests. This involves providing accurate and complete information within the specified timeframe.

The Tax Appeal Tribunal has the authority to summon additional witnesses to testify or produce supplementary documents during trial. Similarly, the procedural rules of High Courts and the Federal High Court empower them to issue subpoenas compelling third parties to testify or submit relevant documents during trial.

6.3 What rules on privilege apply in your jurisdiction?

Tax authorities are empowered by law to have unrestricted access to all lands, buildings, premises, books and documents held or controlled by any public officer, institution or any other person for tax-related purposes.

However, communications between lawyers and their clients in the course of professional employment are protected as privileged information. See 6.1.

7 Evidence

7.1 What types of evidence are permissible in tax disputes in your jurisdiction? Is expert evidence accepted?

The types of evidence permitted in a tax dispute in Nigeria include:

oral evidence (ie, witness testimony); and
documentary evidence, such as:
- financial records;
- tax filing records; and
- business information.

Expert evidence is allowed in tax disputes.

7.2 What is the applicable standard of proof?

Generally, the standard of proof in tax matters hinges on the preponderance of evidence – that is, the claimant must prove its case based on a balance of probabilities. However, if the dispute involves allegations of criminal activity, the standard of proof is beyond a reasonable doubt.

7.3 On whom does the burden of proof rest?

In tax disputes, the burden of proof rests on the taxpayer, as a tax assessment becomes final and conclusive unless the taxpayer persuades the Tax Appeal Tribunal to set it aside.

8 Proceedings

8.1 Are tax proceedings in your jurisdiction public or private? If the former, are any options available to the parties to keep the proceedings or related information confidential?

Tax proceedings in Nigeria are held in public, and there are no options available to parties to keep the proceedings or related information confidential.

8.2 How do the proceedings unfold in your jurisdiction?

Proceedings before the Tax Appeal Tribunal begin with the filing of a notice of appeal by either:

the aggrieved taxpayer; or
the Federal Inland Revenue Service.

Once the notice of appeal and accompanying documents have been submitted, the respondent formally enters an appearance and files a defence.

A pre-trial conference may be held to:

clarify key issues; and
explore the possibility of a settlement.

If no settlement is reached, the case proceeds to trial. During the trial, both parties present witnesses and submit relevant documents as evidence.

At the close of the trial, the legal representatives of both parties submit final written addresses outlining their respective arguments and positions. After reviewing these submissions, the TAT delivers its judgment on the case.

8.3 What is the typical timeframe for proceedings?

Although the TAT Rules require that proceedings be concluded within six months of commencement of the trial, the entire process – from filing the appeal to receiving a judgment – typically takes between one and two years.

8.4 Are settlements possible between the taxpayer and the tax authorities once judicial proceedings have been opened?

Yes. The taxpayer and the tax authorities can explore settlement even after judicial proceedings have begun.

8.5 Do the courts in your jurisdiction have full power to review facts and legal questions?

Yes, the Nigerian courts generally have the power to review both facts and legal questions, depending on:

the type of court; and
the nature of the case.

The TAT, the Federal High Court and state high courts, when sitting as forums of first instance, address both factual and legal issues. This involves:

evaluating evidence;
hearing witness testimony; and
applying the relevant laws to the facts.

However, appeals from the TAT are restricted to points of law. As such, the Federal High Court, when hearing an appeal from the TAT, and subsequent appellate courts, typically review only legal questions, leaving factual determinations undisturbed.

In other cases, appellate courts generally refrain from interfering with a trial court's findings of fact unless:

a party to the appeal is granted leave to introduce a new fact on justifiable grounds; or
the trial court's findings of fact are shown to be unsupported by the evidence presented.

9 Remedies

9.1 What remedies are available in tax disputes in your jurisdiction?

The remedies available in a tax dispute include:

orders setting aside notices of assessment or demand notices issued by the tax authorities;
orders directing the refund of tax already paid;
declaratory orders that:
- interpret the provisions of a tax law; or
- declare a tax assessment to be inconsistent with the relevant law; and
orders restraining the tax authorities from enforcing the tax set aside.

9.2 What factors will the court consider in deciding on the appropriate remedies?

The factors considered by the Tax Appeal Tribunal/court in determining the appropriate remedy include:

the facts of the case;
applicable tax law provisions;
judicial precedents;
the efficacy of the proposed remedy;
the conduct of the parties; and
the implications for public interest.

10 Appeals

10.1 Can the decision of the court be appealed? If so, on what grounds and what is the process?

Yes. A party that is dissatisfied with a decision of the Tax Appeal Tribunal has the right to appeal to the Federal High Court within 30 days of the date of the decision, but only on points of law. If aggrieved by the Federal High Court's judgment, the party may further appeal to the Court of Appeal and then to the Supreme Court. Grounds for appeal may include claims that the lower court:

made an error in law; or
misdirected itself in its judgment.

The appeal process begins with filing a notice of appeal, followed by transmitting the record of proceedings being challenged to the appellate court. Subsequently, both the appellant and the respondent file their respective briefs of argument. During the appeal hearing, the legal representatives of both parties adopt their briefs and oral arguments may be presented if permitted. Once the hearing concludes, the appellate court delivers its judgment.

11 Costs, fees and funding

11.1 What costs and fees are incurred in tax disputes in your jurisdiction? Can the winning party recover its costs?

The costs and fees that may be incurred in tax disputes in Nigeria include:

professional fees for legal representation;
fees for filing and service of court processes and documents; and
out-of-pocket expenses incurred during the proceedings, such as:
- transportation costs; and
- fees for obtaining certified true copies of documents.

According to the Tax Appeal Tribunal (TAT) Rules, parties are generally responsible for their own costs unless costs are incurred:

improperly;
without reasonable cause; or
due to undue delay, misconduct or default.

In such instances, the TAT may exercise its discretion to award costs against:

the defaulting party;
its representative; or
a legal practitioner deemed responsible.

The procedural rules of the high courts of the respective states, the Federal High Court, the Court of Appeal and the Supreme Court empower these courts to award the costs of the action to the successful party. However, the decision to award costs and how much costs are awarded remains entirely within the court's discretion.

Notably, the Court of Appeal in Guinness (Nig) Plc v Nwoke (2000) 15 NWLR (Pt 689) 135 declined a claim for 'solicitors' fees' and deemed it unethical and an affront to public policy for a litigant to attempt to transfer the burden of its solicitors' fees to the other party.

11.2 Are contingency fees and similar arrangements permitted in your jurisdiction?

Contingency fee arrangements are permitted in general civil matters, provided that they meet certain criteria:

The agreement for contingency fees must be reasonable.
The arrangement must not be impaired or rendered void due to factors such as:
- fraud;
- mistake;
- undue influence; or
- violations of public policy.
There must be a genuine cause of action.
The client must be:
- adequately advised on the implications of the arrangement; and
- given the opportunity to engage the legal practitioner based on a fair value for the services rendered.

11.3 Is third-party funding permitted in your jurisdiction?

There is no statute prohibiting third-party funding in Nigeria. However, as Nigeria is a common law jurisdiction, the Nigerian courts adhere to the English common law doctrines of champerty and maintenance, which disapprove of third-party funding in litigation.

Although the Arbitration and Mediation Act, 2023 now allows third-party funding for arbitration, this provision does not extend to tax disputes, as they are considered non-arbitrable in Nigeria.

12 International tax disputes

12.1 What is your jurisdiction's position on the resolution of international tax disputes (eg, advance pricing agreements, mutual agreement procedures, arbitrations)?

Nigeria recognises advance pricing agreements (APAs) and the Mutual Agreement Procedure (MAP) as international tax dispute resolution mechanisms.

Regarding APAs, Paragraph 9 of the Income Tax (Transfer Pricing) Regulations empowers the Federal Inland Revenue Service (FIRS) to enter into APAs which run for periods not exceeding three years. The APAs can:

be exclusively between the FIRS and the taxpayer; or
involve the competent authority of the taxpayer.

Furthermore, Nigeria's double taxation agreements (DTAs) allow for the resolution of disputes involving the interpretation of DTA provisions using MAP.

In respect of arbitration, Nigeria's Constitution grants the Nigerian courts exclusive jurisdiction over issues relating to government revenue – a position confirmed by the Court of Appeal in Esso Exploration & Production (Nig) Ltd v FIRS (2017) LPELR-51618(CA). As a result, tax matters are non-arbitrable.

12.2 Has your jurisdiction implemented the Organisation for Economic Co-operation and Development (OECD) minimum standards with respect to international tax dispute resolution or is it a party to other agreements in this respect?

Nigeria's approach to international dispute resolution is largely consistent with the Action 14 Minimum Standard of the OECD Model Tax Convention. All of its DTAs include the MAP as a mechanism for resolving disputes related to treaty interpretation and application. However, while Nigeria has established a MAP programme and issued relevant guidelines, its practical experience in resolving MAP cases remains limited.

12.3 Does your jurisdiction's position differ significantly from Article 25 of the OECD Model Tax Convention (including commentary)? If so, in what respects?

Reflecting the country's policy against tax arbitration, none of Nigeria's tax treaties includes arbitration provisions in the MAP process.

12.4 How do domestic and international tax dispute resolution mechanisms interplay in your jurisdiction?

The dispute resolution mechanisms under domestic law remain available to a taxpayer that initiates a MAP. However, if the MAP request is accepted, the taxpayer must agree to suspend domestic legal remedies during the MAP process. Tax collection will also be suspended while the MAP case is pending, except for any undisputed portion of the tax, which must be paid regardless of the ongoing proceedings. If the taxpayer is dissatisfied with the outcome of the MAP, it may still pursue domestic legal remedies within Nigeria's legal framework. The ruling of an administrative panel does not hinder a taxpayer from requesting a MAP. However, where a court of competent jurisdiction has ruled on the matter, the decision becomes binding on all parties.

13 Trends and predictions

13.1 How would you describe the current tax dispute landscape and prevailing trends in your jurisdiction? Are any new developments anticipated in the next 12 months, including any proposed legislative reforms?

Nigeria's tax dispute landscape reflects a dynamic and evolving environment, characterised by increased tax audits and enforcement actions by the Federal Inland Revenue Service as part of the government's broader efforts to boost revenue collection. Disputes often involve tax assessments, transfer pricing adjustments and value-added tax issues, particularly in sectors such as:

oil and gas;
telecommunications; and
financial services.

There has also been increased reliance on technology for tax collection and enforcement, particularly for:

filing tax returns;
granting tax credits;
issuing tax assessments; and
computing penalties and interest.

Some notable changes are anticipated in the next 12 months, with four major tax bills recently submitted by the executive to the legislature for consideration:

the Nigeria Tax Bill 2024;
the Nigeria Tax Administration Bill 2024;
the Nigeria Revenue Service (Establishment) Bill 2024; and
the Joint Revenue Board of Nigeria (Establishment) Bill 2024.

These bills aim to modernise the nation's tax system by:

repealing old laws; and
restructuring tax administration agencies and dispute resolution systems to improve their operations and effectiveness.

The bills also introduce significant revisions to tax rates and the revenue-sharing formula among the tiers of government.

Additionally, Nigeria is supporting the proposed United Nations Framework Convention on International Tax Cooperation, marking a significant step in international tax reform. It is anticipated that this initiative will:

introduce simpler rules for taxing the digital economy;
combat tax avoidance; and
address illicit financial flows.

These developments will likely shape Nigeria's tax policies.

14 Tips and traps

14.1 What would be your recommendations to parties facing a tax dispute in your jurisdiction and what potential pitfalls would you highlight?

When faced with a potential tax dispute, taxpayers should act promptly and strategically. The following recommendations are noteworthy:

Promptly seek professional advice: Taxpayers are encouraged to seek legal and tax advice at the earliest indication of a potential tax dispute, such as the receipt of an audit request or an excessive tax assessment. This allows for:
- early analysis of the issues involved; and
- an evaluation of the taxpayer's case before the tax becomes final and conclusive.
Understand the tax laws, rights and obligations: It is crucial for taxpayers to stay informed about the relevant tax laws applicable to them and their rights and obligations regarding each tax.
Explore early settlement with tax authorities: In cases where the dispute hinges on factual issues, it is beneficial for taxpayers to consider settlement discussions with the tax authorities early in the dispute resolution process.
Keep proper records: Taxpayers should maintain comprehensive records of relevant information, including:
- records of tax filings;
- financial statements; and
- business records.
This is important for reference and verification purposes in the event of incorrect tax assessments, audits or investigations.

Pitfalls that a taxpayer should avoid in a tax dispute include:

acting without or contrary to the advice of tax or legal professionals;
ignoring communications from the tax authorities;
failing to comply with deadlines for:
- filing objections;
- filing appeals; or
- responding to the tax authorities' inquiries;
being overly combative or uncooperative with tax authorities;
failing to provide accurate documents during tax audits and investigations;
commencing legal proceedings or negotiations without properly preparing evidence and arguments; and
accepting an unfavourable decision without exploring appeal options or escalating to higher authorities.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

Tax Disputes Comparative Guide

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