February 15, 2018
A Personal Income Tax Act (Amendment) Bill 2018 (the Bill) was recently presented before the House of Representatives for deliberation. The Bill seeks to amend the Personal Income Tax (PIT) Act or the Principal Act by providing that PIT deduction on a worker’s income should be remitted to the tax authority of the state where the individual works or carries on business, rather than the state of residence.
The proposed amendments to the PIT Act, if enacted into law, has significant potential implications for the taxation of individuals in Nigeria and may lead to uncertainty in determining the appropriate revenue authorities to which PIT should be remitted.
Specifically, the determination of the relevant tax authority for tax payment would be uncertain for taxpayers who work in different states due to the nature of their profession/vocation or the dispersed office locations of their employer. It will also present significant compliance difficulties for pensioners, and individuals who receive passive income (including, rent, dividend, interest and royalty) from companies located in different states of the Federation. These points, have apparently not been considered in the proposed Bill.
Although the Bill is still before the National Assembly for debate, the proposed amendments, if enacted into law, have the potential of giving rise to disputes amongst employers, taxpayers and tax authorities with respect to the appropriate authority for tax remittance and filing of tax returns. Thus, given the controversies that this Bill would cause, we believe that the likelihood of passage into law is remote.