The review of the Finance Act has put the need to improve the ease of doing business and encourage the tax and fiscal responsibility in Nigeria.

To accomplish this, the tax regulators has over the last two years, amended various tax and fiscal legislations to align the Nigerian business environment with global standards through the Finance act 2019 and 2020.

One of such amendments is the categorization of companies into small, medium, and large companies, based on annual gross turnover as seen in the Finance Act 2019 (FA 2019). Small companies are companies with annual gross turnover below N25 million; medium size companies have annual gross turnover of N25 million and above but below N100 million, while large companies are those with annual gross turnover of N100 million and above. 

The Finance Act 2020 which took effect from 1 January 2021, made amendments to some tax and fiscal legislations by granting additional tax reliefs to small and medium scale companies. It is certain that the objectives were envisioned to provide an enabling business environment for small and medium scale companies and illustrate the government's drive to ensure SMEs are able to scale through the challenges usually faced during the startup period of their business lifecycle.

To further reduce the burden on businesses, the government through a Public Notice by FIRS on Monday, 29 March 2021 clarified the procedure for self-assessed taxpayers to apply for instalment payment of their companies’ income tax (CIT), in line with Section 77 (5) of the CIT Act, Cap C21, LFN 2004 [as amended by the Finance Act, 2019 (“the Act”)].

The Federal Inland Revenue Service (FIRS) directed taxpayers who intend to settle their CIT in instalments to apply to the Board in writing with evidence of the first instalment of the CIT payable and full payment of the Tertiary Education Tax (TET).

The FIRS reiterated that the final instalment of the CIT must be paid on or before the due date of filing to avoid the enforcement of tax recovery provisions of CITA and the FIRS Establishment Act on any outstanding amount due. 

Moreover, the Finance Act only requires that the application for instalment payments should be accompanied with “evidence of payment of the first instalment” of the CIT payable. There is no requirement in the Act for full payment of TET as a pre-requisite for applying to the FIRS for approval to pay the CIT in instalment contrary to the FIRS’ Public Notice.

TET is a separate tax from CIT, notwithstanding that the provisions relating to the collection of CIT apply to TET. Remarkably, both the Finance Acts, 2019 and 2020 did not amend Section 2(2) of the Tertiary Education Trust Fund (Establishment, etc.) Act which provides, “that the TET shall be due and payable within 60 days after the FIRS has served notice of the assessment on a company”.

Hence, it is unclear why the FIRS have included the full settlement of the TET as a requirement for granting the application for payment of CIT in instalments. The FIRS may, therefore, need to revisit this requirement to ensure that it is consistent with the provisions of the extant tax laws. 

In the meantime, taxpayers who do not have sufficient WHT credit notes to offset their estimated 2021 tax year CIT liabilities, but wish to settle any outstanding amount in instalments, should proactively apply to the FIRS for approval of their payment plan.


Source: FIRS and KPMG report.