Citn New Professional Syllabus - Indirect Taxation

INDIRECT
TAXATION
PT ONE
CITN
I
INDIRECT TAXATION PTONE CITN Page 1
Contents
PART 1: CUSTOMS & EXCISE
A. VALUATION
B. TARIFF CLASSIFICATIONS
C. PREFERENCES - IMPORT AND EXPORT

 Meaning
 Countries concerned
 Eligibility and rules of origin
 Free circulation
 Warehousing
 Documentation
 Re-exporting
 Transport rule
D. EXPORTS OUTSIDE THE ECOWAS

 Procedures
 Effects
 Community transit and simplified Procedures
E. LICENSES
 Licensing arrangements
 Regulators
 Notices to importers
 Requirements
 Official journal
 Restrictions on imports
F. TARIFF QUOTAS
 The System
 Regulators
 Special provisions
 Claims
 How to claim
 Customs checks
Critical quotas
 Deferred claims
I
G. DUTY RELIEFS
 Permanent reliefs
 Temporary importation
 Type
 Requirements to be met
 Control
 Inward processing relief
Authorization
 Suspension
 Drawback
 Compensatory interest
 Equivalence
 Using warehouses or free zones
 Aircraft
 End - use relief
 Authorization
 Imports
 Records
 Completion or transfers
 Special procedures
 Outward processing relief
 Authorization
 Exporting goods
 Importing goods
 Information documents
 Returnedgoods relief
 Introduction
 Conditions for relief
 Customs Duty
 VAT
 Export procedures
 Re-importation
H. FREE ZONES
 Introduction
 Entering goods into a free zone
 Work carried out in the free zone
 Removal of goods from a free zone
 Payment of duty etc.
 Records required
I
PART 2: EXCISE DUTIES
PART 3: BETTING DUTIES

 General betting duties
 Registration and security
 Records and accounts
 Legal powers and penalties
 Liability to duty
 Notification and payment
Other conditions
 Rate and calculation of duty
 Returns
 Customs & Excise powers
 Pool betting duty
 Who pays duty
 Definition
 Permits
 Paying duty
 Amusement machine licence duty
 Duty liability rates
 Licences
 Payments
 Transfers
 Customs & Excise powers
PART 4: VALUE ADDED TAX
PART 5: NIGERIAN TAXATION STANDARD
I
CHAPTER ONE
1.0. INTRODUCTION
1.1. Definition of Direct Tax

A direct tax is referred to as a tax levied on person‘s income and wealth and is paid
directly to the government, the burden of such tax cannot be shifted. The tax is
progressive in nature i.e. it increases with an increase in the income or wealth and
vice versa. It levies according to the paying capacity of the person, i.e. the tax is
collected more from the rich and less from the poor people. The tax is levied and
collected either by the Central government or State government or the local bodies.
There are several types of Direct Taxes, such as:
Personal Income Tax

Capital Gains Tax
Property Tax
Companies Income Tax
Tertiary Education Tax
1.2. Definition of Indirect Tax

Indirect Tax is referred to as a tax charged on a person who consumes the goods
and services and is paid indirectly to the government. The burden of tax can be
easily shifted to the another person. The tax is progressive in nature, It is levied on
every person equally whether he is rich or poor. The administration of tax is done
either by the Federal Government or the State government.
There are several types of Indirect Taxes, such as:

Stamp duties
VAT (Value Added Tax)
Excise Duty
Custom Duty
1.3. ARGUMENTS FOR AND AGAINST INDIRECT TAXES
Arguments For Using Indirect Taxation Arguments Against Using Indirect Taxation
 Changes in indirect taxes can
 Many indirect taxes make the distribution of
change the pattern of demand by
income more unequal because of their
varying relative prices (e.g. an
regressive effects
increase in the real duty on petrol)
I
 Indirect taxes can be used as a
means of making the polluter pay  Higher indirect taxes can cause cost-push
and ―internalizing the external inflation which can lead to a rise in inflation
costs‖ of production and expectations
consumption
 Indirect taxes are less likely to

 If indirect taxes are too high – this creates an
distort choices between work and
incentive to avoid taxes through ―boot-
leisure and have less of a negative
legging‖
effect on work incentives.
 Revenue from indirect taxes can be uncertain

 Indirect taxes can be changed more
particularly when inflation is low or there is
easily than direct taxes – this gives
a recession causing a fall in consumer
policy-makers more flexibility.
spending
 There is a loss of welfare from duties e.g.

 Indirect taxes are less easy to avoid
loss of producer & consumer surplus
 Indirect taxes provide an incentive  Higher indirect taxes affect households

to save that help to provide finance on lower incomes who are least able to
for investment save
1.4. Comparison Chart
Basis
for Direct Tax Indirect Tax
Comparison
Direct tax is referred to as the tax, Indirect Tax is referred to as the tax, levied
levied on person's income and wealth on a person who consumes the goods and
Meaning
and is paid directly to the services and is paid indirectly to the
government. government.
The person on whom it is levied The burden of tax can be shifted to another
Burden
bears its burden. person.
Luxury Tax, Personal Income Tax,
VAT (Value Added Tax), Stamp Duties ,
Types Capital Gains Tax, Compaies Income
Excise Duty, Custom Duty.
Tax, .
Tax evasion is hardly possible because it is
Evasion Tax evasion is possible. included in the price of the goods and
services.
Direct tax helps in reducing
Inflation Indirect tax promotes the inflation.
the inflation.
I
Basis
for Direct Tax Indirect Tax
Comparison
Persons, i.e. Individual,
Levied on Consumers of goods and services.
Company, Firm etc.
Nature Progressive Proportional
1.4.1.5. DIFFERENCES BETWEEN DIRECT AND INDIRECT

TAXES
1. Allocation Effect
The allocative effects of direct taxes are superior to those of indirect taxes. When a
particular amount is raised through a direct tax like income tax, it would imply a
lesser burden than the same amount raised through an indirect tax like excise duty.
An indirect tax involves excessive burden as it distorts the consumer's preference
regarding goods due to price changes. Thus an indirect tax has an adverse effect on
the allocation of resources than a direct tax.
2. Distributive Effect
Direct taxes are progressive and they help to reduce inequalities. But indirect taxes
are regressive and they widen the gap of inequalities. Hence, direct taxes are
regarded to be superior to indirect taxes in effecting a more equitable distribution
of income and wealth. But this is not always true. Even indirect taxes can be made
progressive by levying them on luxuries and exempting them on necessaries. Both
direct and indirect taxes are alternative methods of achieving any particular
redistribution of income.
3. Administrative Costs
The administrative costs of direct taxes are more than that of indirect taxes. Direct
taxes are narrow based and has many exemptions. Indirect taxes can be
conveniently collected and cost of collection is constant overtime. Indirect taxes
are easier to administer than direct taxes. From point of view of efficiency and
productivity, indirect taxes are better. Indirect taxes are wrapped up in prices and
hence they cannot be easily evaded. They are more productive as their cost of
collection is the least. Thus, from point of view of administrative costs, indirect
taxes are relatively superior.
I
4. Built-in Flexibility and Stability
Direct taxes are more flexible than indirect taxes. During a period of prosperity,
direct taxes fetch more revenue as they are progressive. But indirect taxes are
proportional and they do not fetch as much revenue as direct taxes. Direct taxes
help to reduce the inflationary pressure by taking away the excess purchasing
power and hence they promote stability. But indirect taxes are inflationary. Hence,
from the point of stability, direct taxes are preferred to indirect taxes.
5. Growth Orientation
Indirect taxes are more growth oriented than direct taxes. Direct taxes, being
progressive, reduce savings. When savings and investments are discouraged,
economic growth is adversely effected. Indirect taxes discourage consumption and
increase savings. Indirect taxes on luxuries reduce conspicuous consumption and
channelise resources in to growth oriented programmes.
1.6. Similarities
Payable to the government.
Penalty for the non-payment.
Interest on Delayed Payment.
Improper administration can lead to tax avoidance or tax evasion.
1.7. Conclusion
Both the direct and indirect tax has its own merits and demerits. If we talk about
the direct taxes they are equitable because they are charged on person, according to
their paying ability. The direct tax is economical because its cost of collection is
less but however, it doesn‘t cover every section of the society.
On the other hand, if we talk about the indirect tax, they are easy to realize as they
are included in the price of the product and services, and along with that, it has an
excellent coverage of every section of the society. One of the best advantages of
the indirect tax is, the rate of tax is high for harmful products as compared to the
other goods which are necessary for life.
I
2.0. VALUATION
2.1. INTRODUCTION
The customs value of imported goods is determined mainly for the purposes of
applying ad valorem rates of customs duties. It constitutes the taxable basis for
customs duties. It is also an essential element for compiling trade statistics,
monitoring quantitative restrictions, applying tariff preferences, and collecting
national taxes.
Customs valuation is used to determine the value of goods when they are being
entered into the various customs procedures e.g. import, export, warehousing and
processing under customs control. The customs value is essential to determine the
correct amount of any customs duty to be paid on imported goods.
2.2. CUSTOMS VALUATION

In the majority of cases customs duty is charged as a percentage of the value of the
goods being imported – ―ad valorem duty‖. In order to calculate the amount of
duty payable the customs value must first be established.
Today, almost all customs administrations of the current 157 WTO Members
value imported goods in terms of the provisions of the WTO Agreement on
Customs Valuation (adopted in 1994). This Agreement establishes a customs
valuation system that primarily bases the customs value on the transaction value of
imported goods, which is the price actually paid or payable for the goods when
sold for export to the country of importation, plus, certain adjustments of costs and
charges.
Currently more than 90% of world trade is valued on the basis of the transaction
value method which provides more predictability, uniformity and transparency for
the business community.
The WTO Valuation Agreement is formally known as the Agreement on
Implementation of Article VII of the General Agreement on Tariffs and Trade
(GATT) 1994. It replaced the GATT Valuation Code as a result of the Uruguay
Round multilateral trade negotiations which created the WTO in 1994.
The Agreement provides a Customs valuation system that primarily bases the
Customs value on the transaction value of the imported goods, which is the price
actually paid or payable for the goods when sold for export to the country of
importation, with certain adjustments.
Where the Customs value cannot be determined on the basis of the transaction
value, it will be determined using one of the other methods of valuations, however,
the valuation methods must be used in hierarchical order
I
2.2.1. Methods of Valuation
There are six methods of valuation applicable to all goods, namely:
1. The transaction value method;
2. The transaction value of identical goods;
3. The transaction value of similar goods;
4. The deductive method;
5. The computed method; and
6. The residual valuation provision or fall back or derivative method
The methods listed above must be applied in sequence.
2.2.2. Use the Valuation Methods

 Customs duties can be designated in either specific or ad valorem terms or as
a mix of the two. In case of a specific duty, a concrete sum is charged for a
quantitative description of the good, for example N1.00 per item or per unit.
The customs value of the good does not need to be determined, as the duty is
not based on the value of the good but on other criteria. In this case, no rules
on customs valuation are needed and the Valuation Agreement does not
apply.
 In contrast, an ad valorem duty depends on the value of a good. Under this

system, the customs valuation is multiplied by an ad valorem rate of duty
(e.g. 5 per cent) in order to arrive at the amount of duty payable on an
imported item.
Definition
Customs valuation is a customs procedure applied to determine the customs value
of imported goods. If the rate of duty is ad valorem, the customs value is essential
to determine the duty to be paid on an imported good.
2.3. AGREEMENT
Article VII of the General Agreement on Tariffs and Trade laid down the general
principles for an international system of valuation. It stipulated that the value for
customs purposes of imported merchandise should be based on the actual value of
the imported merchandise on which duty is assessed, or of like merchandise, and
should not be based on the value of merchandise of national origin or on arbitrary
or fictitious values. Although Article VII also contains a definition of ―actual
value‖, it still permitted the use of widely differing methods of valuing goods. In
addition, ‗grandfather clauses‘ permitted continuation of old standards which did
not even meet the very general new standard.
I
2.4. Brief Evolution of Custom Valuation Methods
2.4.1. Brussels definition of value

Starting in the 1950s, customs duties were assessed by many countries according to
the Brussels Definition of Value (BVD). Under this method, a normal market
price, defined as ―the price that a good would fetch in an open market between a
buyer and seller independent of each other,‖ was determined for each product,
according to which the duty was assessed. Factual deviations from this price were
only fully taken into account where the declared value was higher than the listed
value. Downward variations were only taken into account up to 10 per cent. This
method caused widespread dissatisfaction among traders, as price changes and
competitive advantages of firms were not reflected until the notional price was
adjusted by the customs office after certain periods of time. New and rare products
were often not captured in the lists, which made determination of the ―normal
price‖ difficult. The USA never became part of the BVD. It was clear that a more
flexible and uniform valuation method was needed which would harmonize the
systems of all countries.
2.4.2. Tokyo Round Valuation Code

The Tokyo Round Valuation Code, or the Agreement on Implementation of
Article VII of the GATT, concluded in 1979, established a positive system of
Customs Valuation based on the price actually paid or payable for the imported
goods. Based on the ―transaction value‖, it was intended to provide a fair, uniform
and neutral system for the valuation of goods for customs purposes, conforming to
commercial realities. This differs from the ―notional‖ value used in the Brussels
Definition of Value (BVD). As a stand-alone agreement, the Tokyo Round
Valuation Code was signed by more than 40 contracting parties.
2.4.3. The new Agreement

The Tokyo Round Code was replaced by the WTO Agreement on Implementation
of Article VII of the GATT 1994 following conclusion of the Uruguay Round.
This Agreement is essentially the same as the Tokyo Round Valuation Code and
applies only to the valuation of imported goods for the purpose of levying ad
valorem duties on such goods. It does not contain obligations concerning valuation
for purposes of determining export duties or quota administration based on the
value of goods, nor does it lay down conditions for the valuation of goods for
internal taxation or foreign exchange control.
I
2.5. Basic principle: Transaction value
The Agreement stipulates that customs valuation shall, except in specified
circumstances, be based on the actual price of the goods to be valued, which is
generally shown on the invoice. This price, plus adjustments for certain elements
listed in Article 8, equals the transaction value, which constitutes the first and most
important method of valuation referred to in the Agreement.
2.6. The 6 Methods

For cases in which there is no transaction value, or where the transaction value is
not acceptable as the customs value because the price has been distorted as a result
of certain conditions, the Agreement lays down five other methods of customs
valuation, to be applied in the prescribed hierarchical order. Overall the following
six methods are considered in the Agreement:
Method 1 — Transaction value
Method 2 — Transaction value of identical goods
Method 3 — Transaction value of similar goods
Method 4 — Deductive method
Method 5 — Computed method
Method 6 — Fall-back or derivative or residual valuation provision method
The sequence of methods 4 and 5 can be switched at the request of the importer
(not, however, at the discretion of the customs officer). Moreover, the Agreement
contains provisions for special and differential treatment of developing countries
and for technical assistance. Since this Agreement is an integral part of the single
WTO undertaking, all WTO Members are Members of the Customs Valuation
Agreement.
2.6.1. Method 1 — Transaction value

2.6.1a. Definition of transaction value
The price actually paid or payable is the total payment made or to be made by the
buyer to or for the benefit of the seller for the imported goods, and includes all
payments made as a condition of sale of the imported goods by the buyer to the
seller, or by the buyer to a third party to satisfy an obligation of the seller.
2.6.1b. Conditions to be fulfilled

a. Evidence of sale - There must be evidence of a sale for export to the country
of importation (i.e. commercial invoices, contracts, purchase orders, etc.).
b. No restriction on the disposition or use - There must be no restriction on

the disposition or use of the goods by the buyer, other than restrictions
I
which:
— are imposed or required by law in the country of importation;
— are limited to the geographic area in which the goods may be resold;
— do not substantially affect the value of the goods.
c. It should not be subject to additional conditions - The sale or price must

not be
subject to conditions or considerations for which a value cannot be
determined with respect to the goods being valued.
— the seller establishes the price of the imported goods on the condition that
the buyer will also buy other goods in specified quantities;
— the price of the imported goods is dependent upon the price or prices at
which the buyer sells other goods to the seller;
— the price is established on the basis of a form of payment extraneous to the
imported goods.
d. Full prices must be disclosed - No part of the proceeds of any subsequent

resale, disposal or use of the goods by the buyer will accrue directly or
indirectly to the seller, unless adjustment can be made in accordance with
provisions in Article 8.
e. Buyer and seller not related, otherwise - The buyer and seller are not
related, but even if so, the use of the transaction value is acceptable if the
importer demonstrates that:
— the relationship did not influence the price, or
— the transaction value closely approximates a test value.
2.6.1c. Related parties

The definition of related persons according to Article 15 of the Agreement, which
states that persons are to be deemed to be related only if:
— they are officers or directors of one another's businesses;
— they are legally recognized partners in business;
— they are employer and employee;
— any person directly or indirectly owns, controls or holds 5 per cent or more of
the outstanding voting stock or shares of both of them;
— one of them directly or indirectly controls the other (the Interpretative Note to
Article 15provides that for the purposes of the Agreement, one person shall be
deemed to control another when the former is legally or operationally in a position
to exercise restraint or direction over the latter. The note also states that ―persons‖
includes a legal person, where appropriate).
I
— both of them are directly or indirectly controlled by a third person; or
— they are members of the same family.
2.6.2. Method 2 — Transaction value of identical goods

(Article 2)
The transaction value is calculated in the same manner on identical goods if the
goods are:
— the same in all respects including physical characteristics, quality, and
reputation;
— produced in the same country as the goods being valued;
— and produced by the producer of the goods being valued.
For this method to be used, the goods must be sold for export to the same country
of importation as the goods being valued. The goods must also be exported at or
about the same time as the goods being valued.
2.6.2a. Exceptions
Some exceptions are accepted, in particular:
— where there are no identical goods produced by the same person in the country
of production of the goods being valued, identical goods produced by a different
person in the same country may be taken into account.
— minor differences in appearance would not preclude goods which otherwise
conform to the definitions from being regarded as identical.
The definition excludes imported goods which incorporate engineering, artwork

etc., provided by the buyer to the producer of goods free of charge or at a reduced
cost, undertaken in the country of importation for which no adjustment has been
made under Article 8.
2.6.3. Method 3 — Transaction value of similar goods (Article 3)

The transaction value is calculated in the same manner on similar goods if:
— goods closely resembling the goods being valued in terms of component
materials and characteristics
— goods which are capable of performing the same functions and are
commercially interchangeable with the goods being valued
— goods which are produced in the same country as and by the producer of the
goods being valued. For this method to be used, the goods must be sold to the same
country of importation as the goods being valued. The goods must be exported at
or about the same time as the goods being valued.
I
2.6.4. Method 4 — Deductive value
Deduction of value from the price of the greatest aggregate quantity sold
The Agreement provides that when customs value cannot be determined on the
basis of the transaction value of the imported goods or identical or similar goods, it
will be determined on the basis of the unit price at which the imported goods or
identical or similar goods are sold to an unrelated buyer in the greatest aggregate
quantity in the country of importation. The buyer and the seller in the importing
country must not be related and the sale must take place at or about the time of
importation of the goods being valued. If no sale took place at or about the time of
importation, it is permitted to use sales up to 90 days after importation of the goods
being valued.
2.6.4a. Determination of the greatest aggregate quantity sold

Under Article 5.1, the unit price at which the imported goods or identical or similar
imported goods are sold in the greatest aggregate quantity is to be the basis for
establishing the customs value. The greatest aggregate quantity is, according to the
Interpretative Note to that Article, the price at which the greatest number of units is
sold to unrelated persons at the first commercial level after importation at which
such sales take place. To determine the greatest aggregate quantity all sales at a
given price are taken together and the sum of all the units of goods sold at that
price is compared to the sum of all the units of goods sold at any other price. The
greatest number of units sold at one price represents the greatest aggregate
quantity.
2.6.4b. Deductions from the price at the greatest aggregate quantity

Since the starting point in calculating deductive value is the sale price in the
country of importation, various deductions are necessary to reduce that price to the
relevant customs value:
— commissions usually paid or agreed to be paid, the sum of profits and general
expenses added in connection with sales must also be deducted;
— the usual transport costs and corresponding insurance are to be deducted from
the price of the goods when these costs are usually incurred within the country of
importation;
— the customs duties and other national taxes payable in the country of
importation by reason of the importation or sale of the goods are also to be
deducted;
— value added by assembly or further processing, when applicable.
I
2.6.5. Method 5 — Computed value
2.6.5a. Definition: Production cost and profits and expenses
Computed value, the most difficult and rarely used method, determines the
customs value on the basis of the cost of production of the goods being valued,
plus an amount for profit and general expenses usually reflected in sales from the
country of exportation to the country of importation of goods of the same class or
kind. Computed value is the sum of the following elements:
2.6.5b. Production cost = value of materials and fabrication

 The cost or value of materials and fabrication or other processing employed
in producing the imported goods. Materials would include, for example, raw
materials, such as lumber, steel, lead, clay textiles, etc.;
 Costs to get the raw materials to the place of production; subassemblies,
such as integrated circuits; and prefabricated components which will
eventually be assembled
 Fabrication would include the costs for labour, any costs for assembly when
there is an assembly operation instead of manufacturing process, and indirect
costs such as factory supervision, plant maintenance, overtime, etc.
 Cost or value is to be determined on the basis of information relating to the
production of the goods being valued, supplied by or on behalf of the
producer. If not included above, packing costs and charges, assists,
engineering work, artwork, etc. undertaken in the country of importation
would be added.
2.6.5c. Profit and general expenses

Profit and general expenses usually reflected in export sales to the country of
importation, by producers in the country of importation on the basis of information
supplied by the producer, of goods of the same class or kind. The latter phrase
means goods which fall within a group or range of goods produced by a particular
industry or industry sector and includes identical or similar goods. The amount of
profit and general expenses has to be taken as a whole (i.e. the sum of the two).
General expenses could include rent, electricity, water, legal fees, etc.
2.6.5d. Other expenses to be added

Finally, other expenses should be added to the price such as the cost of transport of
the imported goods to the port or place of importation, loading, unloading and
handling charges associated with the transport of the imported goods to the port or
place of importation, and the cost of insurance.
I
2.6.6. Method 6 — Fall-back or derivative or residual valuation
provision method
2.6.6a. Definition
Customs value determination based on ―reasonable means consistent with the
principles and general provisions of the Agreement, Article VII GATT and on the
basis of available data‖.
When the customs value cannot be determined under any of the previous methods,
it may be determined using reasonable means consistent with the principles and
general provisions of the Agreement and of Article VII of GATT, and on the basis
of data available in the country of importation. To the greatest extent possible, this
method should be based on previously determined values and methods with a
reasonable degree of flexibility in their application.
2.6.6b. Valuation criteria not to be used

Under the fall-back method, the customs value must not be based on:
— the selling price of goods in the country of importation (i.e. the sale price of
goods manufactured in the importing country);
— a system which provides for the acceptance for customs purposes of the higher
of two alternative values (the lowest should be used);
— the price of goods on the domestic market of the country of exportation
(valuation on this basis would go against the principle in the Preamble that
―valuation procedures should not be used to combat dumping‖);
— the cost of production other than computed values which have been determined
for identical or similar goods (valuation must be arrived at on the basis of data
available in the country of importation);
— the price of goods for export to a third country (two export markets are always
to be treated as separate and the price to one should not control the customs value
in the other);
— minimum customs value (unless a developing country has taken the exception
which allows for use of minimum values);
— arbitrary or fictitious values (these prohibitions are aimed at systems which do
not base their values on what happens in fact in the marketplace, as reflected in
actual prices, in actual sales, and in actual costs, reason of the importation or sale
of the goods are also to be deducted;
2.7. Institutions
a. Committee on Customs Valuation
The Agreement establishes a Committee on Customs Valuation composed of
representatives from each of the Members for the purpose of affording Members
the opportunity to consult on matters relating to the administration of the customs
I
valuation system by any Member or the furtherance of the objectives of the
Agreement.
b. Technical Committee on Customs Valuation

The Agreement also establishes a Technical Committee on Customs Valuation
under the auspices of the World Customs Organization with a view to ensuring, at
the technical level, uniformity in interpretation and application of the Agreement.
The responsibilities of the Technical Committee include advising on specific
technical matters as requested by Members or by a panel in a dispute.
The most common method of valuation is the transaction value, which uses the
invoice price. Wherever possible this is the method to be used. Only when the
transaction value method cannot be used should the other methods be considered.
3.0. CUSTOMS ADMINISTRATION
 Customs help in revenue collection by collecting taxes e.g. VAT on goods

and services
 Protects the community by debarring prohibited goods from being imported
into the country.
 Aids trade facilitation between countries and Protection of national security
3.1. The key factors that can contribute to the effectiveness and efficiency of
the customs administration in Nigeria
i. Leadership and Commitment:
The need for high levels of integrity must be stressed within the headship of
customs and executive management team. Custom managers should
demonstrate a clear and equivocal focus on integrity and be seen to set an
example that is consistent with both the letter and spirit of the Code of
Conduct.
ii. Regulatory Framework:
Customs laws, regulations, administrative guidelines and procedures should
be harmonised and simplified to the greatest extent possible so that Customs
formalities can proceed without undue burden. This process involves the
adoption of internationally agreed conventions, other instruments and
accepted standard.
iii. Transparency:
Customs clients are entitled to expect a high degree of certainty and
predictability in their dealings with Customs. Customs laws, regulations,
I
procedures and administrative guidelines should be made public, be easily
accessible and applied in uniform and consistent manner.
The basis upon which discretionary powers can be exercised should be
clearly defined.
iv. Automation:
Automation or computerisation of Customs function can improve efficiency
and effectiveness and remove any opportunities for corruption. Automation
can also increase the level of accountability and provide an audit trail for
later monitoring and review of administrative decisions and the exercise of
official discretion.
v. Reform and Modernisation:
Customs administrations should reform and modernise their systems and
procedures to eliminate any perceived advantages which might be obtained
through circumventing official requirements since corruption occurs in
situations where out-dated and inefficient practices are employed.
vi. Audit and Investigation:
The prevention and control of corruption in Customs can be assisted by the
implementation of a range of appropriate monitoring and control
mechanisms such as internal check programmes, internal and external
auditing and investigation and prosecution regimes.
vii. Code of Conduct:
A key element of any effective integrity programme is the development,
issue and acceptance of a comprehensive code of conduct which sets out in
very practical and unambiguous terms the behaviour expected of all Customs
personnel.
viii. Human Resources Management:
The implementation of sound human resources management policies and
procedures play a major role in the fight against corruption in Customs by
providing sufficient salary, recruiting and retaining personnel with high
standards of integrity, implementing appropriate performance appraisal and
management system.
ix. Morale and Organisational Culture:
Custom employees are more likely to act with integrity when morale is high,
where human resource management practices are fair and where there are
reasonable opportunities for career development and progression.
x. Relationship with the Private Sector
Customs administrators should foster an open, transparent and productive
relationship with the private sector. Client groups should be encouraged to
accept an appropriate level of responsibility and accountability for the
problem and the identification and implementation of practical solutions.
I
The establishment of Memoranda of Understanding between Customs and
Industry Bodies can be useful in this regard.
xi. Segregation of functions:
Segregation of functions, rotation of assignments and random allocation of
examinations among Customs officers and in certain circumstances regular
rotation of staff is a good weapon to achieve effectiveness and efficiency.
xii. Disciplinary Measures:
Management should instil in its officers loyalty and pride in their services so
as to reduce their exposure to corruption.
xiii. Remuneration Package:
The remuneration package of Custom officers should be sufficient to afford
them a decent standard of living and may in certain circumstances include
social benefits such as health care, housing facilities, or incentive payment.
xiv. Recruitment and advancement Process:
There should be objectivity in the process of recruitment and advancement
of Custom officers. There should be no interference in the process. The fair
process should include means of identifying applicants who have and are
likely to maintain a high standard of professional ethics.
3.2. Effects of corruption to the economy

 Reduction in foreign investment
 Revenue leakage and fraud
 Reduction in national security and community protection.
 Increased costs which are ultimately borne by the community
 Maintenance of barriers to international trade and economic growth.
 Reduction in public trust and confidence in Government institutions.
 Reduction in the level of trust and co-operation between customs
administrations and other Government agencies
 Reduction in the level of voluntary compliance with customs laws and
regulation
 Low staff morale and ―espirit de corps‖.
 Promote bad governance
 Aids capital flight
3.3. Some of the benefits of destination inspection are listed below:

 Improvement of trade facilitation to cope with increased demand by
traders for faster clearance of goods.
 Securing revenue collection.
 Combating fraud and smuggling.
I
 Guaranteeing national security and fighting terrorism.
 Complying with the prevailing international regulations and
guidelines in the domain of Customs valuation, trade facilitation,
conformity and security.
 Addressing congestion at ports and in-land border posts.
3.4. Responsibilities of Importers as required by the Nigerian Customs Service

i. Persons intending to import physical goods into Nigeria must firstly
process Form M through any bank irrespective of the value and
whether payment is involved or not.
ii. Consignments shall bear the name of products, country of origin,
specifications, date of manufacture, batch or lot number, standard(s)
to which they were produced (e.g. BS, DIN, ISO/IEC, NIS etc.)
Foodstuff (including drinks), pharmaceuticals and chemicals should
carry expiry dates and/or shelf life and specify active ingredients
where applicable on their packaging. The expiry date should be at
least half the shelf life as at the time of inspection.
iii. All electronics equipment/items and instruments MUST carry
INSTRUCTIONAL MANUAL and not diagrams and notation on the
containers. All electronic equipment/items and instruments MUST
carry SAFETY information and/or safety signs. All electronic
equipment/items and other instruments where applicable MUST carry
a GUARANTY/WARRANTY of at least of six months.
iv. Computer hardware and software must be year 2000 compliant.
v. Plant materials, whether for planting, consumption of industry shall be
covered with phytosanitary certificate of the country of export,
certifying that the plant materials was inspected and found free from
pests and that some treatment has been made where applicable in line
with the International Plant Protection Convention of FAO.
vi. Every manufactured item including components and spare parts shall
be branded and bear manufacturers‘ names. Electrical appliances
(fluorescent lamps, electric bulbs electric irons, kettles etc.) are
required carry information about their life performance whilst cables
must carry information on their rating.
vii. Misrepresentation of products specifications will result in delays
and/or seizure. Supply of wrong information with an intention to cheat
will also result in delays and/or impoundment/seizure with attendant
consequences. Blank products will be automatically seized and
destroyed.
I
viii. All goods imported into the country shall be labelled in English in
addition to any other language or render themselves liable to
confiscation.
ix. Manufactured goods and materials are subject to Standard
Organisation of Nigeria‘s (SON) certification in accordance with the
provision of its enabling law.
x. The importer shall advise his supplier on the need to submit after the
completion of inspection, the Commercial Invoice within 72 hours to
the Inspection Agent. This is to facilitate the issuance of Clean Report
of Inspection by the Inspection Agent.
xi. The importer shall ensure that he pays the appropriate customs duty as
established on the Clean Report of Inspection to any of the designated
banks.
3.5. Goods lost, damaged or defective.

* No duty is payable on any goods that are short shipped or lost in transit before
release into free circulation.
* If damage occurred before the goods are released into free circulation the
customs value may be amended.
3.6. Evidence of loss, damage or defective goods

Examples of evidence that may be accepted are as follows:
 a credit note from the seller;
 a statement from the customs office that examined the goods;
 a certificate of condemnation;
 a statement from an independent expert such as a surveyor; or
 details of settlement of claim against insurer or carrier.
The above is not an exhaustive list.
3.7. Revised customs value

How is the revised customs value calculated?
The revised customs value may be calculated by:
 apportioning the original price paid or payable to take account of partial loss
or damage;
 using the revised price paid or payable where the seller reduces the price as a
result of the loss or damage;
I
 comparing the price at which the damaged goods are sold with the published
average market values for the same type of goods at the time of sale, and
using the ratio to apportion the invoice price.
3.8. Goods are found to be defective after importation

If the defects are repaired and the seller reimburses the importer under warranty for
the cost of the warranty work carried out a claim for a partial refund of duty may
be considered. Full details of the contractual arrangements covering the warranty
work should be provided along with evidence of:
 the discovery and nature of the defect (including sufficient details to identify
the goods concerned);
 the repair work undertaken and the cost;
 the reimbursement of the repair cost by the seller in accordance with the
terms of the warranty.
3.9. Duties and Taxes Applicable outside the ECOWAS

Where the imported goods are subject to duties and taxes applicable outside the
Community such duties and taxes are to be included in the customs value. The
cost of these duties and taxes will normally be borne by the seller and therefore
form part of the price paid or payable for the goods. Any claim for a reduction in
the customs value on the basis that the goods have been or will be relieved from
such duty/taxes can be allowed. This can be done where satisfactory evidence is
presented that the benefit of such relief will be passed on to the buyer.
3.10. Charges that can be excluded

In cases where either the transaction value, transaction value of identical goods or
the transaction value of similar goods method is being used, certain expenses are
not to be included.
The following expenses should not be included provided they are distinguished
from the price actually paid:
i. charges for construction, erection, assembly, maintenance or technical
assistance, undertaken after importation of imported goods such as
industrial plant, machinery or equipment;
ii. customs duties and other taxes payable in the Community by reason of the
importation or sale of the goods;
iii. a charge for the right to reproduce the imported goods in the Community;
iv. buying commissions (fees paid by an importer to an agent for the service of
representing him/her in the purchase of the goods being imported);
I
v. transport charges after importation into the customs territory of the
Community;
vi. charges for interest under a financing arrangement entered into by the buyer
and relating to the purchase of imported goods provided that:
- the financing arrangement has been made in writing; and
- where required, the buyer can demonstrate that such goods are actually
sold at the price declared as the price actually paid or payable;
- the claimed rate of interest does not exceed the level for such transactions
prevailing in the country where, and at the time when, the finance was
provided.
3.11. Benefits of the Agreement (GATT)

 The Agreement is intended to provide a single system that is fair, uniform
and neutral for the valuation of imported goods for Customs purposes.
 To make valuation to conforming to commercial realities and outlawing the
use of arbitrary or fictitious Customs values.
 The Agreement, by its positive concept of value, recognizes that Customs
valuation should, as far as possible, be based on the actual price of the goods
to be valued.
 With the majority of world trade valued on the basis of the transaction value
method, the Agreement provides more predictability, stability and
transparency for trade, thus facilitating international trade while at the same
time ensuring compliance with national laws and regulations.
3.12. Methods of disposing goods by the NCS:

1. Destroying the goods
2. Returning the goods to the supplier
3. Placing them under customs warehousing or free zone procedures
4. Delivering them free of charge to a charity
I
CHAPTER FOUR
4.0. TARIFF/QUOTAS
4.1. INTRODUCTION
Tariffs are taxes, or the amount of money a country needs to pay for trading
products. Quotas are the limitations on what is traded, how much is traded, how
much is paid for each product traded, and where it‘s traded.
Tariffs are more beneficial to a country‘s economy because the amount of money
paid for their product raises their country‘s GDP. Quotas aren‘t because they put
limits on how much is paid, and that is what makes GDPs neutral.
For a number of products, a reduction of the customs duty payable is allowed for
limited quantities of imports. This limitation takes the form of tariff quotas.
Tariff quotas may apply to imports of a specified origin, normally within the
framework or preferential tariff arrangements, or to imports of all origins.
4.1. Tariffs are duties or taxes imposed by government on selected imported

commodities in order to restrict imports and conserve foreign exchange.
The following are the bases for imposing tarrifs:

- To protect infant industries
- To prevent dumping
- As a means of raising revenue
- As a retaliatory measure
- To encourage production of goods of strategic importance (i.e. for strategic
reasons)
- To promote employment at home
- To restrict importation of demerit or harmful goods thereby regulating the
consumption.
- To correct an adverse balance of payment or to ensure favourable balance
of payment.
- To prosecute political objectives or decisions through imposition of
sanction
4.2. Regulators
Economic blocs or commissions established by the blocs controls, regulates and
manages the tariffs and quotas. e.g. the EU established the European commission
I
to manage quotas and tariff for the EU countries. While ECOWAS has the
economic commission to manage the member countries.
4.3. TARIFF CLASSIFICATIONS

A tariff is a tax levied on imports. It is imposed for protectionist reasons, but of
course provides extra revenue for the government which imposes it. Countries are
free to impose whatever tariffs they want, subject to certain provisos. These
provisos include any bilateral trade agreements made as members of a trading bloc
such as the EU and ECOWAS the need for the product concerned the danger that
the exporting country will retaliate by imposing similar restrictions on imports
from the same country.
4.3.1. Tariffs are usually grouped under three headings:

 Single-column tariffs apply (for a particular product) to all countries
 Double-column tariffs have one rate for most countries of origin and
another – or perhaps several others – at a reduced rate for other countries.
These reduced rates are the result of negotiations between countries seeking
a mutual advantage e.g. under the old GATT arrangements. Here, the most
favoured nation‘ agreement means that all nations so favoured get the same
rate, although there are exceptions.
 Preferential tariffs favour a particular country or group of countries.
Common markets have a common external tariff against the rest of the
world, with lower or no tariffs internally.
4.4. BASES FOR LEVYING TARIFFS:

 An ad valorem tariff is levied on the basis of value; although what constitute
value may vary e.g. some countries include the value of shipping packs.
 A specific tariff nominates a cash amount per unit, regardless of value.
 A compound or mixed tariff is a combination of ad valorem and specific.
Import levies, import surcharges and border taxes are all thinly disguised tariffs,
usually aimed at discouraging dumping.
I
CHAPTER FIVE
5.0. TRADE PREFERENCES AGREEMENTS IMPORT and EXPORT
5.1. Meaning
High level trade agreements between countries mean importers and exporters can
pay less or no duty on certain goods traded with these countries. It replaces
business link.
The International trade under preference allows a person or group of persons to
import and/or export goods at a lower or nil rates of customs duty and/or levy
charge.
5.2. For example in Nigeria
The rate of duty payable depends on –
 The type of goods
 Whether importing or exporting
 Where the goods are deemed to have come from i.e. the originating country.
 Their destination for example, the preference agreements that apply in the
Nigeria are applicable across the ECOWAS.
Trade preferences agreements are principally, but not exclusively, designed to
enable developing countries to have greater access to export markets such as the
ECOWAS.
5.3. What preferences are and how they work

ECOWAS member states have multiple Free Trade Agreements (FTAs) or
Economic Partnership Agreements (EPAs) in place with third countries and with
blocs of countries acting together under bilateral or regional agreements of their
own.
In general, agreements enable preferential importing and/or exporting conditions to
be placed on goods that meet prescribed rules of origin and other criteria.
FTAs and EPAs are constantly evolving, with countries graduating from one
scheme to another, being de-graduated and/or products being removed or added to
the list of preferences and/or being restricted under temporary or permanent limits
or tariff quotas. As a result, those whose businesses are likely to be affected are
advised to keep abreast of developments.
5.4. Eligibility for import preferences

If you import goods, you must be clear on where the products have ‗originated‘ in
order to manage duty and customs requirements effectively.
The origin of your goods is either where they have been wholly obtained or
produced or where the last significant work essential to the manufacture was
undertaken.
I
Every stage of the supply chain can have a significant effect on whether you can
import the goods using preferences. If goods are manufactured entirely in one
country, you would expect their origin to be that country. However, if components
are made in one country then assembled in another non-ECOWAS country, in
combination with other components, the country of origin may be where the goods
are assembled.
I
5.5. CERTIFICATES OF ORIGIN :CO
Depending on the regulatory authority of the importing country, the certification of
origin for a product can be made through the application of a Certificate of Origin
(CO) with the authorized authority in the exporting and importing country.
Exporters and importers must check the certification arrangements required in the
various schemes of preference and free trade arrangements and make the
appropriate mode of origin certification for their exports and imports.
5.5.1. CATEGORY OF CERTIFICATES OF ORIGIN

Certificates of Origin can be broadly classified into types, namely Ordinary
Certificates of Origin and a Preferential Certificates of Origin.
1. Ordinary Certificate of Origin: An Ordinary Certificate of Origin is a
document that can be used to satisfy buyers that the products exported are wholly
obtained, produced or manufactured in a certain country e.g. Nigeria.
2. Preferential Certificate of Origin: A Preferential Certificate of Origin is a
document that can help improve the competitive edge of exports by enabling
buyers to claim preferential tariff treatment when importing the products under one
of the Schemes of Preferences or Free Trade Agreements
5.5.2. APPLICATION FOR THE CERTIFICATE OF ORIGIN

Nigeria Customs is not the government agency authorized to issue the Certificate
of Origin. Those who want to apply for an ordinary CO may contact the following
agencies authorized to issue CO:
 Department of Foreign Trade, Ministry of Commerce;
 Nigerian Chamber of Commerce; and
 Ministry of Industry
 On the other hand, the Department of Foreign Trade, Ministry of Commerce
is the government agency authorized to issue the Preferential CO.
5.5.3. The Concept of Origin

Origin is the "economic" nationality of goods in international trade. There are two
kinds : non-preferential and preferential.
 Non-preferential origin confers an "economic" nationality on goods. It is
used for determining the origin of products subject to all kinds of
commercial policy measures e.g. anti-dumping measures, quantitative
restrictions, tariff quotas, etc. It is also used for statistical purposes. Other
provisions, such as those related to public tenders or origin marking, are also
linked with the non-preferential origin of the products.
I
 Preferential origin confers certain benefits on goods traded between
particular countries, namely entry at a reduced or zero rate of duty.
5.5.4. Rules of origin are used:

 to implement measures and instruments of commercial policy such as anti-
dumping duties and safeguard measures;
 to determine whether imported products shall receive Most-Favoured-Nation
(MFN) treatment or preferential treatment;
 for the purpose of trade statistics;
 for the application of labeling and marking requirements; and
 for government procurement.
I
5.6. CUSTOMS WAREHOUSE
A customs warehouse can either be a defined location (such as premises or a place)
or an inventory system authorised by the customs for storing imported/exported
goods that are:
a. Chargeable with import duty, excise duty or VAT or
b. Otherwise not in free circulation depending on the circumstances, a defined
location can be the whole of a building, a small compartment in a building,
an open site, a silo or a storage tank.
5.6.1. Types of Customs Warehouse

A customs warehouse can be either a public or a private warehouse.
 A public warehouse is authorised for the use of a warehouse keeper whose
main business is the storage of goods placed under the Customs warehousing
procedure by other traders (known as depositors).
 A private warehouse is for the storage of goods placed under the customs
warehousing procedure by an individual trader who is authorised as the
warehouse keeper. The warehouse keeper need not necessarily own the
goods (but must be the depositor)
5.6.2. Procedure on warehousing

- On arrival of any goods at a warehouse, the warehouse keeper shall
immediately report such arrival to the proper officer.
- Goods which are entered for warehousing shall be deemed to be duly
warehoused as from the time certified by the proper officer.
- Except as permitted by the Board (NCS) all goods shall be
warehoused in the containers or lots in which they were entered for
warehousing however any goods warehoused in contravention of this
subsection shall be forfeited.
- The warehouse keeper shall mark the containers or lots of any
warehoused goods in such a manner as the proper office may direct.
- The proper officer may direct in what parts of a warehouse and in
what manner any goods shall be kept.
5.6.3. Every warehouse keeper shall provide the following facilities;

- Provide and maintain at the warehouse such officer, lavatory and
sanitary accommodation for the proper officer with the requisite
furniture, lighting and cleaning, as the board may direct.
- Provide and maintain such appliances, and afford such other facilities
for examining and taking account of goods.
I
- Stack and arrange the good in the warehouse so as to permit
reasonable access to be examination of every container or lot of such
goods at all times.
- Provide all necessary labour and materials for the storing, examining,
packing, marking, coopering, weighing and taking stock of the
warehoused good whenever the proper officer so requires.
- Provide security and its maintenance.
5.7. Free Circulation

This term is used in relation to free circulation of goods throughout the
European Economic Community (EEC). The fundamental principle of the
free movement of goods within the European Economic Area means that all
quantitative import and export restrictions as well as measures having an
equivalent effect must be removed. In West Africa, free circulation is being
promoted through the economic integration of the region.
The Economic Community of West African States (ECOWAS) was

established in 1975 with the objective of liberalizing trade among member
states, the elimination of tariff and non-tariff barriers, and ultimately
achieving an economic and monetary union after successfully going through
the process of a free trade, custom union and common market. Specifically,
it aimed at the elimination of all tariff and non-tariff restriction on intra-
ECOWAS trade.
The principle of the free movement of goods also means that all goods
which have been lawfully placed on the market do not need to satisfy any
authorization procedures.
5.8. Transport Rule

Transport Rule ensures that the goods arriving in the country of importation
are identical to those goods that left the country of exportation. The
objective of this rule is to reduce the chance that goods eligible for
preferences under a free trade arrangement will be manipulated or mixed
during transportation with non-eligible goods. This means that the direct
transport rule is in fact not an ―origin rule‖ per se, but an administrative
requirement to prevent circumvention and abusive manipulations of
originating goods during transportation.
In certain origin provisions, strict measures are foreseen in order to allow

customs to keep goods eligible for preferences, while they are transported
I
from one territory of a Contracting Party of a free trade zone to another,
under customs surveillance, even if transportation necessitates stop-overs or
trans-shipment through a third country (in European context – NAFTA is
tacit about specific provisions with regard to customs surveillance of
commodities during transportation through third countries).
Most of the preferential rules of origin provisions contain requirements for

the transportation of originating goods which will benefit from trade
preferences contained in regional trade arrangements when imported to a
beneficiary country. However, in certain circumstances there are derogations
of the transport rule.
The transport rules may be in certain instances very strict, requiring direct
transportation of consignments between exporting and importing countries.
In other origin models rules on transportation are less restrictive – mainly
due to geographical factors in cases where direct transport is not always
possible or economically not opportune due to exigencies of trade – thus,
indirect transportation or transportation through non-contracting parties of a
preferential trade arrangement is allowed under certain conditions.
5.9. Destination Inspection is offered as a support service to the Nigeria

Customs Service. It is an outsourced service which involves the
inspection of foreign sourced goods at the port of destination. The
needs underlying the demand for inspection services arose from the
huge loss of revenue by Government on imported goods and the need
to ensure the security of life by ensuring that prohibited items and
dangerous goods are not imported to the country.
5.9.1. Some of the benefits of destination inspection are listed

below:
 Improvement of trade facilitation to cope with increased demand by
traders for faster clearance of goods.
 Securing revenue collection.
 Combating fraud and smuggling.
 Guaranteeing national security and fighting terrorism.
 Complying with the prevailing international regulations and
guidelines in the domain of Customs valuation, trade facilitation,
conformity and security.
 Addressing congestion at ports and in-land border posts.
I
I
I
CHAPTER SIX
6.1. IMPORT DUTY IN NIGERIA
Import duty is a tax levied on imports by Customs Authorities to generate revenue
and to protect domestic industries from more efficient or predatory competitors
from abroad.
6.2. Evolution of Import Duty Assessment and Collection in Nigeria

Import duty assessment and collection has always been part of the traditional
functions of the Customs, and the Customs and Excise Management Act, (CEMA)
No. 55 of 1958, which came into effect on April 1, 1959, contains express
provisions to this effect.
Section 37 of CEMA makes payment of import duty mandatory and provides:
1. Except as permitted by or under the customs laws, no imported goods shall
be delivered or removed on importation until the importer has paid to the
proper officer any duty chargeable thereon, and that duty shall, in the case of
goods of which entry is made, be paid on delivery of the entry to the proper
officer.
2. The duties of customs and the rates thereof chargeable on imported goods:
a. If entry is made thereof, except where the entry is for warehousing, shall
be those in force with respect to such goods at the time of delivery of the
entry;
b. If the entry is made thereof for warehousing, shall be ascertained as
provided in section 94 of this Act;
c. If no entry is made thereof, shall be those in force with respect to such
goods at the time of their importation.
6.3. The Proper Officer for assessment and collection of import duty
The proper officer that should receive the payment under the Act is presumably a
Custom Officer.
The Custom Officer as the proper officer remained from 1959 until 1978 when the
Federal Military Government enacted the Comprehensive Import Supervision
Scheme (CISS) Decree No. 30. Of 1978 the purpose of the Decree was to plug the
numerous revenue leakages in the maritime sector, in pursuant to the Decree, a
foreign firm was appointed to examine all shipment of goods destined for Nigeria.
6.4. The national Tax Policy Approach and Fiscal Application of Import
Tariff in Government Budgeting
Government Policy is the intention of the government to achieve a stated goal.
Thus the intention of the government to achieve a tax system that will encourage
I
investment within the Nigeria economy is anchored on the shift from direct tax to
indirect tax using the following measures:
1. Gradual decrease in companies Income tax to an acceptable rate
2. Decrease in the top-rate Personal Income tax to an acceptable rate
3. Shift towards indirect taxation
The national tax policy documents regard the following sectors as ones that should
be accorded priority in the granting of tax incentives.
1. Energy sector
2. Mining
3. Railways/roads
4. Education
5. Aviation
6. Exports
7. Agriculture
6.5. Legal Framework of Import Duties in Nigeria

a. Constitution – in the exclusive legislative list of the constitution, item 16
covers Customs and Excise duties and item 25 expressly mentions export
duties. There is no mention of import duties as it was covered under item
16 as custom duties. The charge of import duties is therefore
constitutional.
b. Statutes – the laws guiding the operations of the Nigeria Custom
Services are contained in Acts and Regulations.
c. Applicable Acts – these are Acts that are relevant to assessment and
collection of import duty:
i. Customs and Excise Management Act
ii. Customs, Excise Tariff, etc. (Consolidation) Act
iii. Customs and Excise Management (Disposal of Goods) Act
iv. Customs Duties (Dumped and Subsidised) Goods Act
d. Applicable Regulations
i. Customs and Excise Agents (Licensing) Regulations
ii. Drawback (Customs) Regulations
iii. Importation and Exportation by Land and Inland Waters
Regulations
iv. Importation and Exportation By Sea Regulations
v. Importation and Exportation By Post Regulations
vi. Importation and Exportation By Air Regulations
I
6.6. Common Issues on Import Duty Administration
a. Common External Tariff

NIGERIA commenced a partial implementation of the ECOWAS Customs
External Tariff (CET) in November 2005 which harmonised its tariffs with those
of other ECOWAS member states and reduced the tariff bands from twenty to five.
s/no Band Items Dutiable
1. 0% Necessaries, special medicaments, industrial machinery and
equipment (industrial machinery and equipment will only attract 0%
duty if imported during the first year of an establishment‘s operation).
2. 5% Raw materials and other capital goods
3. 10% Intermediate goods
4. 20% Finished goods
5. 35% Finished goods in industries that the government wants to
protect.
The tariff structure above is based on the ECOWAS Common External Tariff
(CET) structure of four tariff bands. The fifth band of 35% was not authorised by
ECOWAS.
In 2008, Nigeria reduced the total number of items banned for import from 44 to
26 and reduced import duties considerably in line with the ECOWAS mandate.
b. Charge of Import Duty
i. Section 2 of CETA provides for classification of goods imported and it

states that ―Goods imported into Nigeria shall, for Customs purposes, be in
accordance with the form of Customs tariff set out in the first schedule of
CETA.
ii. Section 3 of CETA provides for charge of import duty thus; where in any
Harmonised System Code i.e. H.S. Code of the first schedule to CETA, a
rate of duty payable shall be the amount of the rate shown in the Customs
Duty Rate for the year or years in which the goods concerned are imported
into Nigeria, and on the importation into Nigeria of goods classified in that
heading or H.S. Code there shall, subject to the provisions of section 4 of
CETA, be charged an import duty at the rate shown in the Customs Duty
Rate column.
iii. Section 37 of CEMA C45, LFN, 2004 provides that duty shall be paid for
imported goods. It states as follows:
(1) Except as permitted by or under the Customs laws, no imported goods
shall be delivered or removed on importation until the importer has
paid to the proper officer any duty chargeable thereon, and that duty
I
shall, in the case of goods of which entry is made, be paid on delivery
of the entry to the proper officer.
(2) The duties of Customs and the rates thereof chargeable on imported
goods:
a. If entry is made thereof , except where the entry is for
warehousing, shall be those in force with respect to such goods
at the time of delivery of the entry;
b. If entry is made thereof for warehousing, shall be ascertained
as provided in section 94 of this Act;
c. If no entry is made thereof, shall be those in force with respect
to such goods at the time of their importation.
c. Excess duty to be paid

Section 15 of CETA, 2004 states instances where excess duty can be repaid. It
provides in subsection (1) thus:
―if the amount paid as duty on any goods under any provision of the Act or any
enactment, together with any additional amount paid under section 14 (1) of this
Act, exceeds the duty payable on such goods immediately after the expiration of
such provision, the balance shall on application, be repaid by the Nigeria Customs
Service to the person who paid such amount‖
6.7. Finality of import duty assessment

Section 136 (1) of CEMA provides that:
― if any dispute arises as to whether or what duty of customs or excise is payable
on any goods, the importer, exporter or proprietor of the goods shall pay the sum
demanded by the proper officer as the duty payable in respect of the goods, and
thereupon the sum so paid shall be deemed to be the proper duty payable in respect
of the goods, unless the contrary is determined by the court upon application by the
importer, exporter or proprietor, which application shall be made within six (6)
months after the date of payment‖. However this provision can only be applied
where the proper officer is involved in the assessment and demand of the Customs
duties and charges payable on goods imported by an importer. A proper officer is a
custom officer or any person employed in the Nigeria Customs Service, or for a
time being performing duties in relation to customs or excise. Independent
contractors of the Federal Government are not permitted to apply the provision of
this section to impose import duties not justifiable in law.
Time of limitation to challenge excessive import duty
I
Section 136 (1) stipulate a six (6) months for application to be brought up for a
challenge of the custom duty imposed and the import duty imposed by the Customs
Officer must be paid first be appeal.
6.8. IMPORT DUTIES COMPUTATION AND RATES

Custom duties are levied on Cost, Insurance and Freight (CIF).
Rates vary for different items, and are assessed with reference to the prevailing
Harmonized Commodity and Coding System (HS code).
 7% surcharge (Port development levy) calculated on the customs duty
 0.5% trade liberalization scheme levy, calculated on customs duty (where
import is from countries outside the ECOWAS region);
 1% Comprehensive Import Suspension Scheme (CISS) administrative
charge for destination inspection based on the FOB value of goods
 Value Added Tax (VAT) calculated at the rate of 5% on the CIF value of the
import, customs duty and the charges stated above.
6.9. Goods exempted from Custom duty:

 Aircrafts or airlines registered in Nigeria and providing commercial services
in Nigeria;
 Films, film-strips, microfilms, newsreel, slide and similar visual and
auditory material of educational, scientific or cultural character imported by
the United Nations, any of its specialized agencies or an approved education
or science organization
 Fuel, lubricants and similar products, which the Minister is satisfied
necessary for and will be used solely in the operation of an aircraft of the
armed forces of a foreign power; or an aircraft registered in any recognized
country;
 Goods imported for the head of state, Commander-in-Chief of the Armed
Forces;
 Goods imported for the consular Officers;
 Diplomatic privileged importations;
 Goods obtained free as technical assistance from international donors;
 Passengers baggage;
 Life saving Appliances;
 Military Hardware and Uniforms; and
 Arms and Ammunition imported by the Nigeria Police Force.
I
6.10. Some goods prohibited from importation:
 Beef & beef products
 Fresh or dried fruits, fruit juice in retail packs
 Detergent
 Toothpaste
 Vegetable oil (excluding linseed and castor oils, hydrogenated vegetable fats
used as industrial raw materials and olive oil in bottles)
 All sort of foot wears, bags of leather and plastics and briefcase (excluding
safety and sports wears)
 Sugar confectionaries
 Telephone recharge cards
 Used motor vehicles above 15 years from the year of manufacture
 Biscuits
 Beer
 Certain medicaments
 Bagged cement
 Live or dead birds including frozen poultry
 Bird eggs
 Cocoa butter, powder and cake
 Water, Mineral waters, Aerated waters
 Mosquitoes repellent coils,
 Sanitary ware of plastic
 Ball point pen
 Used compressors
 Hollow glass bottles of capacity exceeding 150mls
6.11. Incentives to ECOWAS Countries (ECOWAS Trade Liberalization

Scheme) ETLS
 Approved products manufactured by beneficiaries of the ETLS are allowed
free access to markets within the ECOWAS region without any import
duties in the destination countries.
 Products approved for the scheme must satisfy the rules of origin which
require at least 60% local raw materials content (volume) or 40% local raw
materials value (monetary) or a minimum of 35% local value added. The
cost, insurance and freight (CIF) value of imported raw material must not
exceed 60% of the total cost of raw materials used.
 ETLS is not fully operational going by the low level of implementation by
member countries.
I
6.12. Fiscal Policies (budget review 2012)
 Review of the 2008 to 2012 Customs and Excise Tariffs to correct anomalies
and introduce policies that will encourage industrialization.
 Effective 31 January 2012, duty on machinery and specific equipment for
use in the agricultural sector to attract zero import duty.
 All equipment for processing of high quality cassava flour and composite
flour blending to be duty free.
 From 1 July 2012, wheat flour to attract import duty of 100%, wheat grain
20%, brown rice 30% and polished rice 50%.
 Rice millers are encouraged to move towards domestic production and
milling of rice. Import duty will thus be increased from 50% to 100%
effective 31 December 2012.
 No waivers or concessions will be granted for rice and wheat production.
 Introduction of import prohibition for cassava flour.
 Equipment and machinery in the power sector will attract zero duty.
 Review of the Export Expansion Grant (―EEG‖) to streamline the scheme
and make it more effective as an instrument for promotion of exports.
 Review of Nigeria's position on the ECOWAS Trade Liberalization Scheme
(―ETLS‖) to avoid dumping.
CHAPTER SEVEN
7.0. EXPORT DUTIES
7.1. EXPORT DRIVE

Export drive is the same as export promotion: It is a deliberate
government policy to encourage the production of a greater variety and
quantity of commodities for export.
I
Export drive is being carried out in the following ways:
- Granting tax concessions to export-based industries
- Allowing export-producers easy access to foreign exchange
- Liberalising the importation of raw materials meant for export
production
- Reduction of export duty to encourage export
- Provision of subsidy and allowing producers of export items easy
access to credit.
- Provision of assistance to new entrepreneurs on export costing and
pricing, and support services.
- Finding a realistic exchange rate for the domestic currency.
- Setting up of export promotion council.
- Establishing of export processing zone.
- Organizing trade fair and exhibition in foreign countries.
- Establishing Nigeria Export-Import Bank (NEXIM).
I
CHAPTER EIGHT
8.0. EXCISE DUTIES

Excise duty or tax is a tax on goods manufactured within Nigeria and payable by
the manufacturers before the goods are removed from the factories or warehouses.
The duty is payable on all manufactured or produced goods unless the goods are
exempted from the duty.
8.1. Goods liable to Excise duty:

 Beer & Stout
 Wines
 Spirits
 Cigarettes and Tobacco
 Goods manufactured and sold in Nigeria
8.2. Legislative Framework for excise Duties in Nigeria

Excise duty is regulated by the following Laws in Nigeria:
a. The constitution of the Federal Republic of Nigeria
b. Customs and Excise Management Act (CEMA)
c. Customs, Excise Tariff etc (Consolidation) Act 1995 as amended
d. Nigerian Customs Service Board Act
e. Excise (Control of Distillation) Act
f. The current common External Tariff of the Nigeria Customs Service 2008 –
2012.
8.3. The constitution of the FRN 1999 – the power to impose taxes including
excise duties can only be deciphered from the constitutional provisions detailing
the legislative power of the government. Thus the exclusive legislative list in the
2nd schedule of the 1999 constitution contains the following items for which the
National Assembly has the exclusive power to make laws:
a. Customs and Excise duties (Item 16)
b. Any matter incidental or supplementary to any matter mentioned elsewhere
in this list (Item 68).
Custom and Excise Management Act (CEMA) – this is the main law regulating
Excise Duties in Nigeria the management and collection of Customs and Excise
duties in Nigeria.
I
8.4. Guidelines/Regulations
 Manufacturers of excisable products are required to apply to Nigeria
Customs Service through the supervising Area Command for
provisional/final approval.
 Premises are entered to enable officers of this Service exercise their legal
power and unhindered access to enter the premises of a manufacturer of
excisable product at any time.
 Manufacturer of excisable goods are also required to enter into Bond (an
undertaking guaranteed by approval Bark) to pay his excise duty when due
or make cash deposit before commencement of manufacture.
 Manufacturers are expected to keep the following records of manufacture
and return –
(a) Material Register
(b) Operation Register
(c) Finished Product Register.
(v) Excise Resident Officers are to ensure periodic supervisory checks
on the operations of the manufacture, their records and ensure
prevailing Excise Duty is charged and collected on the manufactured
goods.
8.5. Rationale for Imposing Excise Duties

- Excise duty plays important role in the fiscal policies of government.
It is therefore a fiscal weapon that can be manipulated to achieve
predetermined economic objectives.
- It has high capacity for re-allocating income.
- Excise duty can be used to influence the exercise of purchasing power
by consumers.
- Excise duty has an import substitution effect, this is because, rates of
excise duty are sometimes reduced or completely eliminated in order
to give impetus to local production activities.
- Excise duty can be used to discourage the proliferation of
industrial development along certain lines to the exclusion of others. For
instance, it may be increased on certain commodities to deter investors.
I
8.6. COMPUTATION OF EXCISE DUTY IN NIGERIA
 Excise duty is based on the Cost of production multiply by the relevant
excise duty rate
Excise Duties in Nigeria %
1. Perfumes and other water, and cosmetics 5%

2. Non-Alcoholic Beverages, Fruit Juice 5%
3. Soap and Detergent 5%
4. Beer and Stout 20%
5. Wines 20%
6. Spaghetti Noodles 5%
7. Spirits and other alcoholic beverages 20%
8. Cigarette and tobacco 20%
9. Telephone recharge cards/vouchers 5%
10.Corrugated paper or paper board and cartons,
Boxes and cases made from corrugated paper and
And paper board 5%
11.Toilet papers, cleansing or facial tissue 5%
LICENCE FEES PAYABLE ₦

Beer and Stout 10,000.00
Cigarette 10,000.00
Spirits and Wine 3,000.00
Others 1,000.00
EXAMPLE
PROMOTION LTD produces three products, CIGARETTES, ALCOHOL and
HOUSE-HOLD GOOD from its factories at ODO-ONA in OYO STATE in
NIGERIA. The company presented to the Custom Services the following data for
its operations for the year ended 31 December 2014:
CIGARETTES ALCOHOL HOUSE-HOLD GOODS

₦‘000 ₦‘000 ₦‘000
Raw Materials 528,000 792,000 132,000
Wages 264,000 396,000 66,000
Direct Expenses 88,000 132,000 22,000

I
Prime Cost 880,000 1,320,000 220,000
Factory Cost 128,000 192,000 32,000
Work in Progress
1/1/2014 100,000 150,000 25,000
Work in Progress
31/12/2014 76,000 114,000 19,000
Administrative
Expenses 84,000 126,000 21,000
Results of Sales
Operative In the
year ended
31/12/2014
Profit/ (Loss) (15,000) 500,000 26,000
Additional Information
(a) Raw materials for ALCOHOL production worth ₦50,000,000 which was
stated to have been for management consumption and thus treated as drawings was
actually a deduction to reduce the amount of excise duties payable. The Custom
Services had just treated the matter as taxable without raising additional penalty.
(b) The Managing Director of Promotion Nig. Ltd. who has some friends and
old school mates at the Nigeria Customs Services visited the organisation and
appealed that no Excise Duties should be raised on Cigarette production from
which the company made a loss in the year. The request was rejected by the
Comptroller of Custom Services and ordered that custom duties of 50% on
cigarettes, 50% on alcohol and 5% on House Hold goods be charged.
Required: Prepare the excise duties chargeable on products produced by
Promotion Nig. Ltd for the year ended 31 December, 2014.
SOLUTION TO QUESTION
I
PROMOTION NIG LTD
Computation of Excise Duties Chargeable for the year ended 31 December,
2014
Cigarettes Alcohol House-Hold Goods

N‘000 N‘000 N‘000
Raw Materials 528,000 792,000 132,000

Raw Materials
(added back) 50,000
Wages 264,000 396,000 66,000
Direct Expenses 88,000 132,000 22,000
Prime Cost: 880,000 1,370,000 220,000
Factory Cost 128,000 192,000 32,000
1,008,000 1,562,000 252,000
Add:Work-in-progress
1/1/14 100,000 150,000 25,000
1,108,000 1,712,000 277,000
Less: Work in Progress
31/12/14 76,000 114,000 19,000
Production cost: 1,032,000 1,598,000 258,000
Excise Duties Rates 50% 50% 5%

N N N
Excise Duties Chargeable 516,000 799,000 12,900
Total Duties Chargeable = N1,372,900,000
I
CHAPTER NINE
9.0. DUTY RELIEFS

This is a relief to an importer or exporter against double or multiple duties. It could
be a temporary or permanent relief, total or partial duty relief. A temporary relief is
of a short period due to the importance of the goods to the importing nation. While
permanent relief is for a longer period depending on the import policies of the
government concerned.
Imported goods which are usually subject to customs duty may be eligible for total
or partial duty relief, subject to what happens to those goods after they are
imported, for example:
a. The intended end-use of the goods
b. Their ultimate destination, or time required to be in the country
c. The nature of subsequent processing
d. Whether the goods contain any Nigerian content
9.1. Temporary Importation Relief

Can be used to temporarily import goods with total or partial relief from duty,
goods must not be processed or repaired other than routine maintenance necessary
to preserve them in the condition in which they are imported. Temporary
importation relief is available for:
i. Goods for an exhibition
ii. Goods for test (but not for distribution), experiment or demonstration
iii. Samples to show prospective buyers
iv. Animals for training/breeding/veterinary treatment or competitions
9.2. Conditions for granting duty reliefs

i. The goods must be in free circulation.
ii. The goods must be temporarily exported from the country.
iii. It must be stated when the goods were exported from the country that
they were going to be re-imported after processing.
iv. If re-importation took place after the goods were processed, repaired,
made up or reworked outside the country.
9.3. Types of duty relief

 Inward processing relief
 End – use relief
 Outward processing relief
 Returned goods relief
I
9.3a. Inward Processing Relief can be used to obtain duty relief on goods
imported for processing and re-export from Nigeria. Processing can be anything
from repacking or sorting of goods to the most complicated manufacturing.
Processing Operations
The following are regarded as processing operations:
a. The working of goods, including mounting, assembly and adjustment to
other goods
b. The processing of goods
c. The repair of goods, including overhaul and tuning
d. The uses of certain goods that do not appear in the compensating products,
but that it will facilitates or simplifies the production of these products.
Systems of Inward Processing

a. Inward processing under the suspension system (AV/S)
b. Inward processing under the drawback system (AV/T)
Inward processing under the suspension system – here the goods are
imported without payment of import taxes, and without the application of trade
policy and agricultural policy measures. The goods undergo a processing operation
and are subsequently re-exported.
Inward processing under the drawback system – under this system, non-community
goods are released into free circulation, on which occasion the import taxes are
paid and trade and agricultural policy measures are complied with.
9.4. END USE RELIEF

End-use duty relief is available on certain goods imported into the country that are
to be processed or put to a specific use.
End use relief allows a reduced or zero rate of customs duty on a short list of
named goods used for prescribed purposes under customs control and within a
specified time period. End-use relief does not apply to VAT or Excise duties.
End-use relief is available on certain goods imported into Nigeria that are to be
processed or put to a specific use. To be eligible for End-use relief, products must
meet defined criteria and be identified in the Tariff. End-use relief is claimable on
end-use goods such as:
i. Shipwork goods
ii. Aircraft and parts
iii. Hydrocarbon oil
iv. Marine propulsion engines
v. Military equipment
vi. Fish
I
vii. Cheese
viii. Casein (used in the cheese industry)
End-use relief means you pay either a reduced rate of import duty or none at all,
but other importation charges such as the following must be paid:
 VAT
 Excise duty
 Anti-dumping duty
9.4.1. End-use relief Authorisation

There are four types of authorisations which can be applied for:
a. Simplified authorisation for end use
b. Single community authorisation for end use
c. Integrated authorisation for end use
d. Retrospective authorisation for end use
9.4.2. Information required for claiming end-use relief

a. A description of the goods
b. A preference code
c. A customs procedure code
d. End-use authorization number
9.4.3. End use goods that are qualify for end use duty relief.
a. Ship work goods
b. Aircraft and parts
c. Hydrocarbon oil
d. Marine propulsion engine
e. Military equipment
f. Fish
g. Cheese
h. Casein (used in the cheese industry)
9.4.4. End – use duty relief means you pay either a reduced rate of import
duty or none at all.
To be able to enjoy end user relief, the following conditions must be met.
I. Authority must be given by the customs
II. The goods must be eligible for end user
III. The goods should be put to prescribed use within certain time
I
9.5. OUTWARD PROCESSING RELIEF
Outward processing relief is a customs procedure that allows traders to temporarily
export free circulation goods from one country for processing or repaid in another
country and then claim full or partial duty relief when the goods are re-imported.
This relief allows the export of goods for processing or repairs. The processing
work range from very simple processing to manufacturing and for goods meant for
re-export, only the duties on the value added to the goods will be paid.
Outward Processing Relief (OPR) is a customs procedure that allows European
Union (EU) traders to temporarily export goods from the EU for processing/repair
in a Non- EU country and then claim full or partial duty relief when the goods are
re-imported.
This enables traders to gain advantages from cheaper labour costs, or processing
that are not available within EU countries.
Before you can claim any duty relief under the OPR procedure, you must apply for
an OPR authorisation and ensure your exported goods and the process or repair
they are to undergo are eligible for duty relief using OPR procedure.
9.5.1. Type of Authorization

(ii) Simplified Authorization
(iii) Fuel UK Authorization
(iv) Single or Community Authorization
(v) Specified Authorization
(vi) Integrated Authorization
(vii) Standard Exchange System
(viii) Non-Commercial Authorization
(ix) Retrospective Authorisation
(x) Notional Authorisation
9.6. RETURNED GOODS RELIEF – this is a relief on goods which are

previously exported and later re-imported in the same condition as exported with
no processing of any kind. Taxable persons may also claim this relief when a Zero-
rated VATable goods are simultaneously released for free circulation and onward
exported to a member of an economic bloc.
9.7. RE-IMPORTATION – this is when goods are imported into a country which
was previously exported from that country.
I
CHAPTER TEN
10.0. Free Zones

A Free Zone is a designated area in which imported and exported goods are treated
as being outside the Customs territory of the country or Economic bloc or
Community for the purpose of import duties. This means that import duties
(including agricultural charges) are not due provided the goods are not released for
free circulation. Import VAT is also suspended until the goods are removed to the
Nigeria market or used or consumed within the Free Zone.
10.1. Nigeria Free Zones are controlled principally on the basis of the requirements
of customs warehousing procedures.
10.2. To operate within Free Zones:

 you will need prior authorisation from Customs, and a supporting letter from
the Free Zone Manager.
 You must provide details on the nature of the activity you plan to pursue,
including description of goods,
 You must provide any details on the handling or processing of those goods,
their storage within any buildings within the Free Zone and the means to
record that storage,
 there may be an additional demand to know legal entity details for the
company, the directors and partners, and any associated businesses
 You should apply in writing to the Customs office responsible for the Free
Zone.
10.3. The tax incentives applicable to Free Trade Zone operations in Nigeria
 Profits arising from the operations in the free trade zone is exempted from
tax
 Plants, machinery and other equipment imported into the country for the use
of free Trade Zone is exempted from VAT
 Dividends received from the profits of the operation carried out in the free
trade zone is also exempted from tax
 There is also exemption from paying state and local government levies and
taxes
 Fixed asset brought into the country operation in the free Trade zone enjoys
accelerated capital allowance.
I
 Profits or gains of 100% export oriented undertaking established within and
outside an export free zone shall be exempted from tax for the first three (3)
consecutive assessment years provided that:
1. the undertaking is 100% export oriented;
2. the undertaking is not formed by splitting or breaking up or
reconstructing a business already in existence,
3. It manufactures produces and exports articles during the relevant year
and the exports proceeds form 75% of its turnover;
4. The undertaking is not formed by transfer of machinery or plant
previously used for any purpose to the new undertaking or where
machinery or plants previously used for any purpose is transferred does
not exceed 25% of the total value of the machinery or the undertaking
5. The undertaking repatriates at least 75% of the export earnings to Nigeria
and replaces it in a domiciliary account in any registered and licensed
bank in Nigeria
10.4. Some of the Benefits accruable from FTZ are as follows:

- Generate revenue for the government
- Provide employment opportunity.
- Skills acquisition
- Transfer of technology from investors
- Lead to infrastructural development in the area e.g. good roads network
linking other part of the country.
- Development of International Airport as well as seaport.
10.5. Some of the Free Trade Zones in Nigeria include:

- Kano Free Trade Zone, sponsored by Federal Government
- Tinapa FTZ and Tourism Resort – Sponsored by Cross River State.
- Olokola FTZ in Ondo – Sponsored by Ondo and Ogun State.
- Lagos FTZ – Sponsored by Eurochem Technologies of Singapore
- Calabar FTZ – Sponsored by Federal Government
- Maigatari Border FTZ – Sponsored by Jigawa State
- Banki Border FTZ – Sponsored by Borno State
- Brass LNG FTZ – Sponsored by Private/Public Partnership
- Snake Island FTZ – Sponsored by NigerdockPlc
- Oil Integrated Logistics Support Services (OILSS) FTZ – in Agbadi
Badagry, Lagos.
I
CHAPTER ELEVEN
11.0. BETTING DUTY

What is general betting duty?
It is a duty charged on the ‗net stake receipts‘ from bets made with a Nigeria-
based bookmaker, other than on-course betting by way of pool betting only on
horse racing or dog racing through a Nigeria-based promoter, by means of a
totalisator situated in the Nigeria, other than on-course betting through a Nigeria-
based bet-broker or through a Nigeria-based betting exchange.
What are the rates of general betting duty?

These are:
 15% for fixed odds bets and totalisator bets
 15% on charges relating to bets taken through a betting exchange
 3% for financial spread bets and
 10% for all other spread bets.
11.1. Gambling Legislation and Regulation in Nigeria
As per Chapter 22 of the Criminal Code Act enacted in 1990, the government of
Nigeria defined exactly what constitutes illegal forms of gambling. Unlawful
gambling refers to roulette, dice games except backgammon, non-skill based card
games, chacha and cowries games, and any other games of chance which are not
favourable to the player. The Act, however, allows betting business and racing
totes.
The gambling laws pertain to both operators and players found to be participating
in unlawful gambling venues. Although it must be said the penalties for owners
and operators of illegal gambling houses is far greater.
In addition to the Criminal Code Act, there are other gambling laws that govern the
operation of gaming machines in Nigeria. There is the Gaming Machines
(Prohibition) Act of 1977, which made it illegal to import or own any gaming
machine. The exception to all of this is licensed land-based casino gaming
establishments, which can offer slot machines and other casino games.
11.2. Lotteries in Nigeria

I
The National Lottery Act of 2004 began regulating a national online lottery game,
Lotto Nigeria. The aim of the Nigerian National Lottery is to raise funds for the
development of National Sports and other good causes for the nation. To play the
Nigerian Lotto you need to pick 6 numbers between 1 and 49. You win the top
jackpot prize if you correctly pick all the winning numbers, but also win a prize if
you guess 5, 4, or 3 of the numbers.
The addition of Quick Lotto, another nationwide online lottery, is a Nigerian

initiative with daily/weekly lotto draws and instant scratch games. They have a
daily Quick 5 lotto draws and a weekly Mega Hammer draw. With the rise of
smartphones in Nigeria, users of these mobile phones can now play online lotto
games without having to find a lottery agent.
11.3. Land Based Casinos in Nigeria

The government of Nigeria has licensed three land-based casinos in Nigeria. The
Federal Palace Casino in Lagos boasts 130 coinless slot machines, which makes it
very easy for slots players to get on a machine. The casino also has 10 table casino
games, ranging from American Roulette, Blackjack and Casino Hold'em. The
casino‘s operator, Sun International, owns around forty properties throughout the
Africa continent.
Eko Hotel & Suites in Lagos is within walking distance of a private beach and has
its own casino that boasts 17 table and card games including Blackjack, Poker and
Roulette. The casino is open daily from 10am. The hotel complex on the premises
has more than 600 rooms.
Transcorp Hilton in Abuja is Nigeria‘s third casino. The casino‘s gaming floor has
over 40 gaming machines, and 9 table (roulette, blackjack) and poker games.
Sports Gambling in Nigeria
Sports‘ betting is booming in Nigeria. Nigerians can wager on sports in betting
shops, over the phone, and on the Internet at Nigerian online sports betting sites.
Football betting is most popular, but they also bet on the basketball, tennis, cricket
and many other world sports and leagues around the world.
Punters can look to bet on local Sports books as well as a variety of overseas
Sports books that include the likes of Britain‘s biggest betting brands.
Among the local brands, Betland is one of the leading land-based bookmakers in
the region with over 100 betting shops. The betting company is regulated in
Nigeria and bets can be placed in person or through their online betting platform.
Winasbet is another major Nigerian sports betting operator. Established in 2011,
Winas Bet have 110 outlets across Nigeria in Aba, Abuja, Benue, Calabar, Eboyin,
Eket, Enugu, Ikot Epene, Ilorin, Lagos, Nassarawa, Port Harcourt, Suleja, Uyo and
I
Warri. They offer betting on football matches, virtual football games, with many
other betting markets available.
Who is a bookmaker?
A person whocarries on a business receiving or negotiating bets or
holds himself out to be a bookmaker.
Who is a bet-broker?
The term bet-broker applies to anyone whoprovides facilities enabling one person
to bet against another or makes or takes a bet on behalf of someone else.
The activities covered by bet brokers do not include betting exchanges and the
provisions of facilities for pool betting
What is a betting exchange?

A betting exchange is defined in law as a business that provides facilities to allow
other parties to bet with each other and does not provide premises that can be used
by anyone making or taking bets.
What are on-course bets?

These bets are taken at a horse or dog race meeting where both the person making
the bet and the bookmaker or totalisator operator accepting bets are present or
from a Nigerian bookmaker, who is not at the meeting, but who makes hedged bets
with a bookmaker who is present at the meeting.
All other bets, usually referred to as off-course bets, are liable to general betting
duty, including bets made by anyone on behalf of a punter who is not present at a
meeting.
What are ‘net stake receipts’?

Your net stake receipts are effectively your gross profits from bookmaking. It
includes the total amount of money due to you for dutiable bets made with you in
an accounting period less money paid out by you in respect of winning dutiable
bets in the same accounting period.
Must a bookmaker be resident in Nigeria to be liable to general betting duty?

No. The law does not provide that you have to be resident in the Nigeria in order to
be a bookmaker in Nigeria for general betting duty purposes. It is therefore
possible for you to be resident outside the Nigeria but be carrying on business as a
bookmaker in the Nigeria. A company may not be liable in the Nigeria for
I
corporation tax but still be a bookmaker in the Nigeria for the purposes of general
betting duty.
Whether you are carrying on the business of receiving or negotiating bets, or
conducting pool betting operations in the Nigeria, is a question of fact. We will
assess each case and the weight we give to any particular factor will depend on
each particular case.
To carry out this assessment we will consider your individual circumstances and
build up a picture of where and how the business of receiving or negotiating bets is
actually run over a period of time. We will take the following factors into account,
but this list is not exhaustive:
Where your business is a company, the place of incorporation.
The company‘s constitution (that is, the memorandum and articles of association,
or equivalent documents). The constitution will provide for:
- how the company‘s business is managed and controlled
- who is responsible for the management and control of the company‘s
bookmaking business and
- where that person, or persons are located.
How your business is organised, operated and administered. To establish this, it
will be necessary to identify the ingredients your business.
I
CHAPTER TWELVE
NIGERIAN TAXATION STANDARDS
SATEMENT OF TAXATION STANDARD (STS)
STS ONE
PART I—INTRODUCTION
When acting for a client, a member of the Institute places his professional expertise
at the disposal of that client and, in so doing, the member assumes a duty of care
towards the client. A member must, therefore, exercise reasonable skill and care
when acting for a client. Failure to exercise such reasonable skill and care may
cause a member to be liable for negligence in the discharge of his professional
duties.
A member of the Institute must understand the duties and responsibilities in respect
of the client and the risks associated with failure to adequately discharge those
duties and responsibilities. The member must manage the risks associated with
advising a particular client. In order to do so, the member must assess his ability to
discharge his duty of care to that client in respect of the matters on which advice is
sought or the work to be undertaken.
For the purposes of this Standard, a taxpayer is a member‘s client.
(This Standard does not apply to a member acting for his employer.)
PART II—EXPLANATORY NOTES
A member has a duty of care to the taxpayer both in contract and tort when he
accepts instructions from his clients. The duty of care in contract will exist whether
or not an engagement letter is issued. If a member fails to properly exercise his
duty of care he may be held to be negligent and liable to the taxpayer for the
damage or harm he has caused as a result of the negligence.
A member should insist on or instigate a letter of engagement to clearly delineate
the scope of his responsibilities. As a professional, there will be expectation that he
takes the initiative to do this.
By taking steps to ensure a taxpayer is acceptable as a client a member will
safeguard his own interest and minimize his liability.
I
PART III—TAXATION STANDARD
STANDARDS EXPECTED FROM MEMBERS WHEN GIVING
PROFESSIONAL SERVICE
The following standards are expected of a member when accepting taxpayers to
whom professional services are to be Provided :
A member should confirm in writing the person /client for whom he will be acting
and the person from whom he will be taking instructions.
A member should carry out identity checks to confirm that a taxpayer is who he
(the taxpayer) claims to be.
A member should consider taking references including references from a previous
tax consultant, if a member is to confirm taxpayer‘s suitability as a client.
KNOW YOUR CLIENT

STEPS TO BE TAKEN IN KNOWING MEMBER’S CLIENTS
A member should identify and resolve any potential conflict of interest which
might prejudice his appointment.
Once appointed to act for a taxpayer but before providing services, it is important
that a member takes steps to know his client.
Knowing the client can be achieved by understanding the following:
a. The scope of the services to be provided
b. To the extent that it is relevant to the scope of service:
c. The taxpayer‘s financial and business affair
d. The taxpayer‘s attitude to risk.
2. When acting for intermediaries including other firms of tax consultants, a
member should clarify whether:
The appointment is with the intermediary and without any direct contact with the
taxpayer ; or
By introduction directly to the taxpayer by the intermediary.
If the member is introduced directly to the taxpayer by the intermediary, then a
member is expected to conduct his own due diligence.
If the member does not have direct contact with the taxpayer then the member
should confirm the scope of what is required and whether and how the advice is to
be disclosed to the client of the intermediary. Such arrangements and terms of
business should be confirmed in writing.
I
STS TWO
TAX RETURNS POSITION
INTRODUCTION
STEPS TO BE TAKEN WHEN RECOMMENDING OR SIGNING TAX
RETURNS POSITION
 This Statement sets out the applicable standards for members when
recommending tax return positions and preparing or signing tax returns
(including claims for refund, and information returns) filed with any tax
authority. For purposes of these standards, a tax return position is:
 A position reflected on the tax return as to which the taxpayer has been
specifically advised by a member , or
 A position about which a member has knowledge of all material facts and,
on the basis of those facts, has concluded whether the position is
appropriate.
 For purposes of these standards, a taxpayer is a client, a member‘s employer,
or any other third party recipient of tax services. Whilst this explanation has
been issued specifically with self-assessment returns in mind, the same
principles apply to any returns submitted to the Federal Inland Revenue
Service (FIRS) and any State Internal Revenue Service (SIRS).
 Taxpayers file tax returns that are true, correct and complete.
 In addition to a duty to the taxpayer, a member has a duty to the tax system.
However, it is well established that the taxpayer has no obligation to pay
more taxes than are legally owed, and a member has a duty to the taxpayer
to assist in achieving that aim.
 A member should be satisfied as a matter of professional judgment that the
filing position is based on or supported by tenable argument based on
existing law, known policy and practice of the relevant tax authority.
 A position would not fail to meet these standards merely because it is later
abandoned for practical or procedural considerations during an
administrative hearing or in the litigation process.
STEPS TO BE TAKEN IN ENSURING PROPER SELF-ASSESSMENT

In determining whether a realistic possibility exists, a member should do all of the
following:
- Establish relevant background facts.
- Extract the appropriate questions from those facts.
- Seek for authoritative answers to those questions.
- Resolve the questions by weighing the authorities uncovered by that search
I
- Arrive at a conclusion supported by the authorities Relevant authorities will
include legislation, case law and prevailing practice of the Federal Inland
Revenue Service or State Internal Revenue Service.
 Apart from the relevant legislation which has to be complied with, a member
should consider the weight of other authorities to conclude whether a
position meets the realistic standard. In determining the weight of such
authority, a member should consider its persuasiveness, relevance, and
source. Thus, the type of authority is a significant factor.
 Other important factors include whether the facts stated by the authority are
distinguishable from those of the taxpayer and whether the authority
contains an analysis of the issue or merely states a conclusion.
 In some cases, a member may conclude that a tax position is not warranted
under the standard set out in paragraph 2.1. A taxpayer is also entitled to
take such a position. Where the taxpayer takes such a position, the member
may prepare the sign the return provided the position is appropriately,
disclosed on the return or claim for refund and the position is one that is
knowingly advanced in bad faith and is patently improper.
 A member‘s determination of whether information is appropriately disclosed

by the taxpayer should be based on the facts and circumstances of the
particular case and the authorities regarding disclosure in the applicable tax
jurisdiction. If a member recommends a position, but not engaged in
preparing or signing of the related tax return, advises the taxpayer
concerning appropriate disclosure of the position, then the member shall be
deemed to meet these standards bearing in mind the consequences that
follow.
 If particular facts and circumstances lead a member to believe that a

taxpayer‘s penalty might be asserted, the member should so advise the
taxpayer and should discuss with the taxpayer the opportunity to avoid such
penalty by disclosing the position on the tax return. Although a member
should advice the taxpayer with respect to disclosure, it is the taxpayer‘s
responsibility to decide whether and how to disclose.
 For purposes of this Standard, preparation of a tax return includes giving

advice in writing on events that have occurred at the time the advice is
given, if the advice is directly relevant to determining the existence,
character, or amount of a schedule, entry, or other portion of a tax return.
I
DUTIES OF MEMBERS REGARDING FILING OF TAX RETURNS
 A member should not recommend to a client acceptance of a tax return
position with respect to any item unless the member is convinced that the
position enjoys the backing of the relevant tax laws and can be effectively
defended if challenged by the relevant tax authority.
 A member should not prepare or sign a return that he/she cannot recommend
and/or defend under the standard expressed in (i) above
 Notwithstanding the foregoing standards on tax return position, a member
may recommend and/or prepare or sign a tax return position that the member
concludes is not false as long as the member advises the taxpayer
appropriately.
 When recommending tax return positions and when preparing or signing a
return on which a tax return position is taken, a member should, when
relevant, advise the taxpayer regarding potential penalty consequences of
such tax return position and the opportunity, if any, to avoid such penalties
through disclosure.
 A member should not recommend a tax return position or prepare or sign a
return reflecting a position that the member knows:
- Exploits the audit selection process of a tax authority.
- Serves as mere arguing position advanced solely to obtain leverage in the
bargaining process of settlement negotiation with a tax authority.
 When recommending a tax return position, a member has both the right and
responsibility to be an advocate for the taxpayer with respect to any position
satisfying the aforementioned standards.
PART IV—SPECIFIC ILLUSTRATIONS

The following illustrations deal with general fact patterns. Accordingly, the
application of the guidance discussed in this Statement to variations in such
general facts or to particular facts or circumstances may lead to different
conclusions. In each illustration there is no authority other than that indicated.
Illustration 1— A taxpayer is faced with an issue involving the interpretation of a

new statute. Following its passage, the statute was widely recognized to contain a
drafting error, and a technical correction proposal has been introduced. The tax
authority issues a pronouncement indicating how it will administer the provision.
The pronouncement interprets the statute in accordance with the proposed
technical correction.
Conclusion: A return position based on the existing statutory language satisfies the
realistic possibility standard.
I
Illustration 2—a tax form published by a tax authority is correct, but completion
of the form as published provides a benefit to the taxpayer. The member knows
that the tax authority has published an announcement acknowledging the error.
Conclusion: In these circumstances, a return position in accordance with the
published for is a frivolous position.
Illustration 3—a taxpayer wants to take a position that a member has concluded as
frivolous. The taxpayer maintains that even if the tax authority examines the
return, the issue will not be raised.
Conclusion: The member should not consider the likelihood of audit or detection
when determining whether the realistic possibility standard has been met. The
member should not prepare or sign a return that contains a frivolous position even
if it is disclosed.
Illustration 4—a statute is passed requiring the capitalization of certain

expenditure. The taxpayer believes, and the member concurs, that to comply fully,
the taxpayer will need to acquire new computer hardware and software and
implement a number of new accounting procedures. The taxpayer and member
agree that the costs of full compliance will be significantly greater than the
resulting increase in tax due under the new provision. Because of these cost
considerations, the taxpayer makes no effort to comply. The taxpayer wants the
member to prepare and sign a return on which the new requirement is simply
ignored.
Conclusion: The return position desired by the taxpayer is false, and the member
should neither prepare nor sign the return.
STS THREE
INTRODUCTION
This statement sets out guidance on the applicable standards for members when
recommending tax return filing positions and preparing returns.
For purposes of this guidance, a tax return filing position is:
(a) a position reflected on the tax return as to which the taxpayer has been
specifically advised by a member ; or
(b) a position about which a member has knowledge of all material facts and on
the basis of those facts, has concluded whether the position is appropriate. For the
purposes of this guidance, a taxpayer is a client, a member‘s employer.
Whilst this guidance has been issued specifically with self-assessment returns in
mind the same principles apply to any returns submitted to the Federal
Internal Revenue Service (FIRS) or any other relevant tax authority.
I
RESPONSIBILITIES OF MEMBERS WHEN TAXPAYERS PRESENT
UNSUPPORTED DATA
A member is not required to examine or verify supporting data. However, a
distinction should be made between:
(a) the need either to determine by enquiry that a specifically required
condition, such as maintaining books and records or substantiating documentation,
has been satisfied or to obtain information when the material furnished appears to
be incorrect or incomplete ; and
(b) the need for a member to examine underlying information. In fulfilling his or
her obligation to exercise due diligence in preparing a self-assessment return, a
member may rely on information furnished by the taxpayer unless it appears to be
incorrect, incomplete or inconsistent. Although a member has certain
responsibilities in exercising due diligence in preparing a return, the taxpayer has
the ultimate responsibility for the contents of the return.
1. Thus, if the taxpayer presents unsupported data in the form of lists of tax
information, such as dividends and interest received, charitable donations and
motor expenses, such information may be used in the preparation of a return
without verification unless it appears to be incorrect, incomplete, or inconsistent
either on its face or on the basis of other facts known to a member.
2. A member should give guidance to a taxpayer on relevant sources of income and
gains, for example, by use of a questionnaire to obtain information.
A member should understand the affairs of the taxpayer and give guidance to the
taxpayer on the nature and extent of income and gains that need to be disclosed on
his return.
Even though there is no requirement to examine underlying documentation
including personal bank statements, dividend and interest vouchers etc., a member
should encourage the taxpayer to provide all supporting data where appropriate.
For example, a member should encourage the taxpayer to submit underlying
documents for use in self-assessment return preparation to permit full
consideration of income and deductions and capital gains.
A member should make use of a taxpayer‘s returns for one or more prior years in
preparing the current return whenever feasible. Reference to prior returns and
discussion of prior year tax liabilities with the taxpayer should provide information
to determine the taxpayer‘s general tax status, avoid the omission or duplication of
items, and afford a basis for the treatment of similar or related transactions.
While a member is not required to check personal bank statements and other
original documents when preparing a return, the member should notify the
taxpayer that under the self-assessment regime the relevant tax authorities are
I
likely to request such documents during the course of an enquiry into the self-
assessment return.
Similarly, sighting of supporting documents may be requested when examining
other returns. Accordingly, a member should notify a taxpayer that all records
should be retained.
A member should make the taxpayer aware of powers of discovery of the relevant
tax authorities and therefore the need to retain records in the event of such
enquiries.
A member should make the taxpayer aware that the various tax authorities have
statutory powers to request such information as may be required to substantiate
entries on tax returns, and that they have the power to call for further returns. In the
event of non-compliance the tax authorities may enforce these powers by applying
distraint or the search and seizure process.
A member has a responsibility for ensuring that a return is completed with due
care, notwithstanding that the taxpayer has ultimate responsibility for signing the
declaration on the return form confirming that the return is true, correct and
complete to the best of the taxpayer‘s knowledge.
STS FOUR
INTRODUCTION
1. This guidance sets out the applicable standards for members in
recommending a tax return position that departs from the position determined in an
administrative proceeding or in a court decision with respect to the taxpayer‘s prior
return.
2. For the purposes of this guidance an ―administrative proceeding‖
includes any ruling arising from the Tax Appeal Tribunal (TAT) or from
examination by any tax authority of a tax return in the course of an enquiry,
determination or assessment by the tax authority of a tax position in relation to a
return or a claim for refund, tax offset or carry forward of tax credit. It also
includes authority having jurisdiction over tax matters, and including the Tax
Appeal Tribunal.
3. For the purposes of this guidance, a ―Court Decision‖ means a decision by
any court of competent jurisdiction.
4. For the purposes of this guidance, a taxpayer is a client.
WHEN A RETURN CAN DEPART FROM AN ADMINISTRATIVE

PROCEEDING OR COURT DECISION
1. If an administrative proceeding or court decision has resulted in a determination
concerning a specific tax treatment of an item in a prior year‘s return, a member
will usually recommend the same tax treatment in subsequent years. However,
I
departures from consistent treatment may be justified in such circumstances as the
following:
(a) Tax authorities tend to act consistently in the disposition of an item that was
the subject of a prior administrative proceeding but generally are not bound to do
so. Similarly, a taxpayer is not bound to follow the tax treatment of an item as
consented to in an earlier administrative proceeding.
(b) The determination in the administrative proceeding or the court‘s decision
may have been caused by a lack of documentation. However, such supporting data
may be available in later year.
(c) A taxpayer may have conceded in the administrative proceeding for
settlement purposes or not appealed the court decision, even though the position is
tenable and realistically possible to defend.
(d) Court decisions, rulings or other authorities that are more favourable to a
taxpayer‘s current position may have developed since the prior administrative
proceeding was concluded or the prior court decision was held.
2. The consent in an earlier administrative proceeding and the existence of an
unfavourable court decision are factors that the member should consider when
advising a client on tax return filing positions.
I
STS FIVE
INTRODUCTION
This standard sets out guidance for members on certain aspects of:
providing advice to a client.
It also considers the circumstances in which a member has a responsibility to
communicate with a client when subsequent developments affect advice previously
provided.
However, this standard does not cover a member‘s responsibilities when the
expectation is that the advice rendered is likely to be relied upon by parties other
than the client.
FORMS OF ADVICE TO CLIENTS

The form of advice may be oral or written and the subject matter may range from
routine to complex. Because the range of advice is so extensive and because advice
should meet the specific needs of a taxpayer, neither a standard format nor
guidelines for communicating or documenting advice to the taxpayer can be
established to cover all situations.
Although oral advice may serve a client‘s needs appropriately in routine matters or
in well-defined areas, written communications are recommended in important,
unusual, or complicated transactions. The member may use professional judgment
about whether, subsequently, to document oral advice in writing.
In deciding on the form of advice to be provided to a taxpayer, a member should
exercise professional judgment and should consider such factors as the following:
(a) the importance of the transaction and amounts involved ;
(b) the specific or general nature of the taxpayer‘s inquiry ;
(c) the time available for development and submission of the advice ;
(d) the technical complications presented ;
(e) the existence of authorities and precedents ;
(f) the tax sophistication of the client ; and
(g) the need to seek other professional advice.
A member may assist a taxpayer in implementing procedures or plans associated
with the advice offered. When providing such assistance, the member should
review and revise such advice as warranted by new developments and other factors
affecting the transaction.
Sometimes a member is requested to provide tax advice but does not assist in
implementing the plans adopted. Although such developments as legislative or
administrative changes or future judicial interpretations may affect the advice
previously provided, a member cannot be expected to communicate subsequent
developments that affect such advice unless the member undertakes this obligation
by specific agreement with the taxpayer.
I
Taxpayers should be informed that advice reflects professional judgment based on
an existing situation and that subsequent developments could affect previous
professional advice. Members may use precautionary language to the effect that
their advice is based on facts as stated and authorities that are subject to change.
In providing tax advice, a member should take cognisance of applicable
confidentiality privileges.
The engagement letter should outline, among other things, issues of the extent and
applicability of confidentiality privileges as protected by the law.
Although advice is given to a client confidentially the member should be aware
that, subject to any claim for privilege that may be asserted by the client, such
advice could be discovered by the tax authorities through proper exercise of their
powers in the course of an enquiry. A member should advise the client where this
becomes a relevant issue.
Where a member has taken specialist advice from a third party on a particular topic
and relays this to the client the member assumes responsibility for the advice in the
context of the client‘s requirements.
STEPS TO BE TAKEN BEFORE GIVING ADVICE

Before giving advice to a client, it is important that the member identifies/ clarifies
the following issues:
1.1 The purpose of the advice
1.2 The scope of the advice
1.3 Who is to rely on the advice
1.4 The risk of reliance
The above issues should be reflected in the engagement letter confirming the
client‘s instructions to the member and the terms on which the advice is to be
provided.
A member should use judgment to ensure that tax advice provided to a taxpayer
reflects professional competence and appropriately serves the taxpayer‘s need. A
member is not required to follow a standard format or guidelines in communicating
written or oral advice to a taxpayer.
A member should assume that tax advice provided to a taxpayer will affect the
manner in which the matters or transactions considered would be reported on the
taxpayer‘s tax returns. Thus, for all tax advice given to a taxpayer, a member
should follow Statement of Taxation Standard (STS) No. 3, Procedural Aspects of
Tax Returns.
A member has no obligation to communicate with a taxpayer when subsequent
developments affect advice previously provided with respect to significant matters,
except while assisting a taxpayer in implementing procedures or plans associated
I
with the advice provided or when a member undertakes this obligation by specific
agreement.
STS SIX
GUIDANCE ON THE APPLICABLE STANDARD FOR A MEMBER WHO
BECOMES AWARE OF AN ERROR IN A RETURN THAT IS
SUBJECTED TO ADMINISTRATIVE PROCEEDING
For the purposes of this standard, an ―administrative proceeding‖ includes:

(a) Any ruling arising from examination by a tax authority of a tax return in the
course of an enquiry;
(b) Determination or assessment by a tax authority of a tax position in relation to a
return or a claim for refund.
2. The term “administrative proceeding” does not include criminal proceeding.
3. The term ―error” includes any position, omission, or method of accounting that,
at the time the return is filed, fails to meet the standards set out in the Statement of
Taxation Standard.
4. The term ―error” also includes a position taken on a prior year‘s return that no
longer meets these standards due to legislation or judicial decisions having a
retrospective effect on the taxpayer‘s liability. However, an error does not include
an item that has an insignificant effect on the taxpayer‘s tax liability.
5. For the purposes of this guidance, a taxpayer is a client, or a member‘s
employer.
6. This guidance applies whether or not the member prepared the return that
contains the error. Special considerations may apply when a member has been
engaged by legal counsel to provide assistance in a matter relating to the counsel‘s
client.
STEPS TO BE TAKEN IN GIVING ADVICE WHEN AN ERROR IS

SUBJECT TO ADMINISTRATIVE PROCEEDING
1. When the member is engaged to represent the taxpayer in an administrative

proceeding with respect to a return containing an error of which the member is
aware, the member should advise the taxpayer to disclose the error to the tax
authority. Such recommendation may be given orally. If the member believes that
the taxpayer could be charged with fraud or other criminal misconduct, the
taxpayer should be advised to consult legal counsel before taking any action.
2. It is the taxpayer‘s responsibility to decide whether to correct the error or not. If

the taxpayer does not correct the error a member should consider whether to
I
withdraw from representing the taxpayer in the administrative proceeding and
whether to continue a professional or employment relationship with the taxpayer.
While recognizing that the taxpayer may not be required by statute to correct an
error by filing an amended return, a member should consider whether a taxpayer‘s
decision not to disclose the error may predict future behaviour that might require
termination of the relationship.
3. A member should consider consulting with his or her own legal counsel before
deciding on recommendations to the taxpayer and whether to continue a
professional or employment relationship with the taxpayer. The potential for
breaching client confidentiality or infringing tax law and the potential adverse
impact on a taxpayer of a member‘s withdrawal, and other considerations may
create a conflict between the member‘s interests and those of the taxpayer.
4. The potential for violating the tax law and regulations, laws on privileged
communications, potential adverse impact on a taxpayer of a member‘s
withdrawal, and other considerations may create a conflict between the member‘s
interests and those of the taxpayer.
5. Once disclosure is agreed upon, it should not be delayed to such a degree that
the taxpayer or member might be considered to have failed to act in good faith or
to have, in effect, provided misleading information. In any event, disclosure should
be made before the conclusion of the administrative proceeding.
6. A member should advise the taxpayer that if an error is not disclosed, it may
prejudice the basis of an assessment or determination made, or any contract of
settlement he reaches with the tax authority. In addition there may be implications
in regard to any Certificate of Disclosure that the taxpayer may be requested to
give, by the tax authority as a condition of a settlement.
7. Whether an error is that which has no more than an insignificant effect on the
taxpayer‘s liability is left to the professional judgment of the member based on all
the facts and circumstances known to the member. In judging whether an error has
more than an insignificant effect a member should consider the method‘s
cumulative effect as well as its effect on the return that is the subject of the
administrative proceeding.
I
STS SEVEN
The purpose of this statement is to guide members on how
To conduct themselves when error is detected in a taxpayer‘s previously submitted
tax return or a taxpayer‘s failure to submit a required return.
Within this guidance, the term error includes any position, omission, or method of
accounting that, at the time the return was submitted, fails to meet the standards set
out in STS 2.
The term error also includes a position taken on the prior year‘s return that no
longer meets these standards due to new law or judicial pronouncements having
retrospective effect. Any item that does not have significant effect on taxpayer‘s
tax liability does not constitute an error.
This standard shall apply whether or not the member prepared the return that
contained the error.
For the purpose of this guidance, a taxpayer is a client; or a member/ tax
practitioner‘s employer.
This guidance has primarily been prepared in respect of the preparation of self-
assessment tax return.
HOW MEMBERS SHOULD CONDUCT THEMSELVES WHEN A

TAXPAYER’S PREVIOUSLY SUBMITTED RETURNS CONTAIN AN
ERROR
1. While performing services for a taxpayer, a member may become aware of an

error in a previously submitted return or may become aware that the taxpayer
failed to submit a required return. The member should advise the taxpayer of the
error and the measures to be taken. If the member believes that the taxpayer could
be subject to criminal prosecution, the taxpayer should be advised to seek legal
advice.
2. It is taxpayer‘s responsibility to decide whether to correct the error.

If the taxpayer does not correct an error, a member should consider whether to
continue a professional or employment relationship with the taxpayer. Where
contrary to a member‘s advice a taxpayer decides not to inform the tax authority of
the error, it is unlikely that a member can continue to act for the taxpayer. A
member should consider taking legal advice before deciding upon
recommendations to the taxpayer and whether to continue a professional or
employment relationship with the taxpayer.
I
3. A member may advise a taxpayer to correct an error either orally or in writing.
Should the taxpayer not follow the member‘s advice and it becomes necessary to
withdraw from a professional or employment relationship with the taxpayer, the
member should confirm his advice in writing.
4. A member should consider whether a taxpayer‘s decision not to inform the tax
authority of such error may predict future behaviour that might require termination
of the relationship. The potential for violating the tax law and regulations or laws
on privileged communications and other considerations may create a conflict
between the member‘s interests and those of the taxpayer.
5. If a member decides to continue a professional or employment relationship with

the taxpayer and is requested to prepare a tax return for a year subsequent to that in
which the error occurred, the member should take reasonable steps to ensure that
the error is not repeated. If the subsequent year‘s tax return cannot be prepared
without perpetuating the error, the member should consider withdrawal from the
return preparation. If a member learns that the taxpayer is using an erroneous
method of accounting and it is past the due date to request permission to change to
a method meeting the standards of STS No.3, the member may sign a tax return for
the current year, provided the tax return includes appropriate disclosure of the use
of the erroneous method.
6. Whether an error has no more than an insignificant effect on the taxpayer‘s

liability is left to the professional judgment of the member based on all the facts
and circumstances known to the member.
7. If a member becomes aware of the error while performing services for the
taxpayer that do not involve return preparation, the member‘s responsibility is to
advise the taxpayer preferably in writing of the existing error and to recommend
that the error be discussed with the taxpayer‘s tax adviser.
I
Use of Estimates
STS EIGHT
1. This statement sets out guidance on the applicable standards for member when
using the taxpayer‘s estimates in the preparation of a self-assessment return. A
member may advise on estimates used in the preparation of a return, but the
taxpayer has the responsibility to provide the estimated data. Valuations are not
considered estimates for the purposes of this statement.
For the purposes of these standards, a taxpayer is a client, a member‘s employer, or
any other third party recipient of tax services. Whilst this guidance has primarily
been drafted in respect of the preparation of self-assessment tax returns, certain
aspects are also relevant to the preparation of returns for submission to the relevant
tax authority.
POINTS TO NOTE WHEN MEMBERS GIVE ADVICE TO CLIENTS ON

ESTIMATES IN THE PREPARATION OF A TAX RETURNS
1. Accounting requires the exercise of professional judgement and, in many

instances, the use of approximations based on judgement, the application of such
accounting judgements, as long as not in conflict with recognised accounting
standards or methods recognised by the Federal Inland Revenue Service or State
Internal Revenue Service are acceptable. Such judgements are not estimates in the
context of this guidance.
2. Where a taxpayer‘s records do not accurately reflect information related to small
expenditure, accuracy in recording some data may be difficult to achieve.
Therefore, the use of estimates in determining the amount to be deducted for such
an item may be appropriate.
3. Where the use of estimate in the preparation of tax returns is statutorily required,
a member is to base the preparation and filing of the returns on the taxpayer‘s
estimated data. An instance of this is section 33(1) of Petroleum Profits Tax Act,
CAP P13, LFN 2004 which states “Not later than two months after the
commencement of each accounting period of any company engaged in petroleum
operations, the company shall submit to the Board a return of its estimated tax for
such accounting period”
4. When records are missing or precise information about a transaction is not
available at the time the returns are to be filed, a member may prepare a tax return
using a taxpayer‘s estimate of the missing data.
I
5. Estimated amounts should not be presented in a manner that provides a
misleading impression about the degree of factual accuracy.
I
CHAPTER THIRTEEN
VALUE ADDED TAX
INTRODUCTION
Value Added Tax (VAT) was introduced into Nigeria Tax System in 1993 through
the enactment of the Value Added Tax Act of 1993.
VAT is a replacement of the erstwhile Sales Tax which was being operated by the
various State Governments of Nigeria.
REASONS FOR THE REPLACEMENT OF THE SALES TAX

Sales Tax had a narrow base which covered few categories of goods and services
and hotels. The narrow base of Sales Tax did not capture all consumable goods and
services. Value Added Tax has a broader base which in addition to capturing all
consumable goods and services also included most professional services and
banking transactions.
The Sales Tax only captured locally manufactured goods but VAT brought
imported goods into the tax net
Sales Tax was haphazardly operated by the various State Governments with the
resultant low yield
DEFINITION OF VAT
Value Added Tax (VAT) is a consumption tax borne by the final consumer of a
VATable product or services and levied at multiple stages. From the above
definition, VAT has three characteristics, namely:
It is a consumption tax
It is a multi-stage tax
The incidence (burden) is on the final consumer.
ADMINISTRATION OF VAT IN NIGERIA

Section 7 of VATA 2007 as amended grants the power of the administration and
management of VAT to Federal Inland Revenue Services Board and the Board
may do such things as it may deemed necessary and expedient for the assessment
and collection of the tax and shall account for all amounts so collected in
accordance with the provisions of the Act.
REGISTRATION
Section 8(1) of the Act states that all VATable persons shall within six months of
the commencement of the Act or within six months of the incorporation of the
company whichever is earlier, register with the Board for the purpose of the tax
I
Section 8(2) of the Act states that a VATable person who fails or refuses to register
with the Board within the time specified in Sub section (1) above shall be liable to
pay as penalty an amount of:
N10,000.00 for the first month in which the failure occurs, and
N5,000.00 for each subsequent month in which the failure persists/continues
VATABLE PERSONS
VATable persons includes an individual or body of individuals, family,
corporation, trustee or executor or a person who carries out in place an economic
activity, a person exploiting tangible and intangible property for the purpose of
obtaining income therefrom by way of trade, of business, or a person or agency of
government acting in that capacity.
REGISTRATION BY GOVERNMENT MINISTRIES, AGENCIES AND

PARASTATALS
The Act states that every Government Ministry, Statutory Body and other agencies
shall register as agent of the Board for the purpose of collection of tax under this
Act
Every contractor transacting business with a Government Ministry, Statutory
Body, and other Agencies of the three tiers of government shall produce evidence
of registration with the Board as a condition for obtaining a contract.
REGISTRATION BY NON-RESIDENT COMPANIES

For the purpose of this Act, a non-resident company that carries on business in
Nigeria shall register for the tax with the Board, using the address of the person
with whom it has a subsisting contract, as its address for purposes of
correspondence relating to the tax
A non-resident company shall include the tax in its invoice and the person to
whom the goods or services are supplied in Nigeria shall remit the tax in the
currency of the transaction
Tax invoice
A taxable person who makes a taxable supply shall, in respect of that supply,
furnish the purchaser with a tax invoice containing, inter alia, the following-
(a) tax payers identification number;
(b) name and address;
(c) VAT registration number;
(d) the date of supply;
(e) name of purchaser or client;
(f) gross amount of transaction;
I
(g) tax charged and rate supplied.
A tax invoice shall be issued on supply whether or not payment is made at the time
of supply
VAT RETURNS
Taxable person to render returns
(1) A taxable person shall render to the Board, on or before the 21st day of the
month following that in which the purchase or supply was made, a return of all
taxable goods and services purchased or supplied by him during the preceding
month in such manner as the Board may, from time to time, determine.
(2) A person who imports taxable goods into Nigeria shall render to the Board re-
turns on all the taxable goods imported by him into Nigeria.
(3) In this regard, any payment made to duly authorised Government agents shall
be deemed to have been made to the Federal Inland Revenue Service
Remission of tax
A taxable person shall, on rendering a return under subsection (1) of section 15 of
this Act-
(a) if the output tax exceeds the input tax, remit the excess to the Board; or
(b) if the input tax exceeds the output tax, be entitled to a refund of the excess tax
from the Board on production of such documents as the Board may, from time to
time, require.
An importer of taxable goods shall, before clearing those goods, pay to the Board
the tax on those goods
Effect of failure to render returns

Where a taxable person fails to render returns or renders an incomplete or
inaccurate returns, the Board shall assess, to the best of its judgment, the amount of
tax due on the taxable goods and services purchased or supplied by the taxable
person.
Effect of non-remittance of tax

(1) If a taxable person does not remit the tax within the time specified in section 15
of this Act, a sum equal to five per cent per annum (plus interest at the commercial
rate) of the amount of tax remittable shall be added to the tax and the provisions of
this Act relating to collection and recovery of unremitted tax, penalty and interest
shall apply.
(2) The Board should notify the taxable person or his agent of the tax due together
with the penalty and interest and if payment is not made within thirty days of such
I
notification, the Board may proceed to enforce payment as provided in section 15
of this Act
Allowable input tax

For purposes of section 13 (1) of this Act, the input tax to be allowed as a
deduction from output tax shall be limited to the tax on goods purchased or
imported directly for resale and goods which form the stock-in-trade used for the
direct production of any new product on which the output tax is charged.
Input tax-
(a) on any overhead, service, and general administration of any business which
otherwise can be expended through the income statement (profit and loss ac-
counts)
(b) on any capital item and asset which is to be capitalised along with cost of the
capital item and asset, shall not be allowed as a deduction from output tax
Offences and Penalties
Furnishing of false document, etc.

A person who-
(a) produces, furnishes or sends for the purpose of this Act or otherwise makes
use for that purpose of a document which is false in any material particular;
(b) in furnishing an information to the Board, makes a statement which is false in
any material particular, is guilty of an offence and liable on conviction to a fine of
twice the amount under- declared.
Evasion of tax
A person who-
(a) participates in;
(b) takes steps with a view to make evasion of the tax by him or any other person,
is guilty of an offence and liable on conviction to a fine of N30,000 or two times
the amount of the tax being evaded, whichever is greater, or to imprisonment for a
term not exceeding three years.
Failure to make attribution

A person required to make an attribution, who-
(a) fails to do so; or
(b) having done so, fails to notify the Board, is liable to pay a penalty of N5,000.
I
Failure to notify change of address
A person who fails to notify the Board of any change of address within one month
of such change, is liable to pay a penalty of N 5,000.
Failure to issue tax invoice

A person who fails to issue a tax invoice for goods sold or services rendered, is
guilty of an offence and liable on conviction to a fine of 50% of the cost of the
goods or services for which the invoice was not issued.
Resisting, etc., an authorised officer

A person who-
(a) resists, hinders or obstructs or attempts to resist or hinder an authorised officer
acting under section 39 of this Act; or
(b) fails to comply fully with any requirement made under section 39 of this Act;
or
(c) makes any statement in response to a requirement made under section 5 of this
Act which is false or incomplete; or
(d) procures or attempts to procure by any means any other person to act as afore-
said, is guilty of an offence and liable on conviction to a fine of N I 0,000 or
imprisonment for a term of six months or to both such tine and imprisonment.
Issuing of tax invoice by an unauthorised person

A person who, other than-
(a) a person registered under this Act; or
(b) a person authorised to do so under this Act, issues an invoice purporting to be
attributable to tax, is guilty of an offence and is liable on conviction to a tine of N
l0,000 or imprisonment for a term of six months.
Failure to register
A taxable person who fails to register under this Act, is guilty of an offence and
liable on conviction to a fine of N5,000 and, if after one month, the person is not
registered, the premises where the business is carried on shall be liable to be
sealed up.
Failure to keep proper records and accounts

A taxable person who fails to keep records and accounts of his business
transactions to allow for the correct ascertainment of tax and filing of returns is
liable to pay a penalty of N 2,000 for every month in which the failure continues.
I
Failure to collect tax
A taxable person, who fails to collect tax under this Act, is liable to pay as penalty
150% of the amount not collected, plus 5% interest above the Central Bank of
Nigeria rediscount rate.
Failure to submit returns

A taxable person who fails to submit returns to the Board, is liable to a fine of
N 5, 000 for every month in which the failure continues.
Aiding and abetting commission of offence, etc.

(1) An officer of the Board or any other person who aids or abets the commission
of any of the offences under this Act, is guilty of an offence and is liable on
conviction to a fine of N50,000 or to imprisonment for a term of five years.
(2) Where a person's conduct during any specified period has involved the
commission or omission by him of anyone or more of the foregoing offences under
this Act, then whether or not the particulars of the offences are known, he shall, by
virtue of this section, be guilty of an offence and liable to pay a fine of N 10,000 or
four times the amount of any tax that was, or was intended to be evaded by his
conduct, whichever is greater, or to imprisonment for a term not exceeding six
months or to both such fine and imprisonment.
Offence by body corporate, etc.

Where an offence under this Act is committed by a body corporate or firm or other
association of individuals-
(a) every director, manager, secretary or other similar officer of the body corpo
rate; or
(b) every partner or officer of the firm; or
(c) every person concerned in the management of the affairs of the association; or
(d) every person who was purporting to act in any capacity as aforesaid, is
severally guilty of that offence and liable to be proceeded against and punished for
the offence in like manner as if he had himself committed the offence, unless he
proves that the act or omission constituting the offence took place without his
knowledge, consent or connivance
PREPARATION & FILING OF TAX RETURNS: VALUE ADDED TAX

(VAT)
General disclosure
This comprises of the identification of the VAT payer and includes:
VAT identification number (given by FIRS on registration by VAT payer within
6mths of commencement of business)
I
Name of the VAT payer
Address of the VAT payer including E-mail address
Nature of business of VAT payer
Period covered
Specific Disclosures
Taxable Goods and Services – VAT is charged and paid on the supply of all goods
and services other than those exempted by the law, and the VAT is calculated at
the rate prescribed by the VAT Act.
Value of Taxable Goods and Services – the value of taxable goods and services is
determined as follows:
If the supply is for money consideration, the value is an amount which with the
addition of the VAT payable is equal to the consideration
If the supply is exchanged by barter or is given free or the service is rendered free,
the value of the supply is its market value. The market value of supply of taxable
goods or services is taken to be the amount for such consideration in money
payable by a person in a transaction at arm‘s length.
Where the supply of taxable goods or services is not the only item to which
consideration in money relates, the value of the supply shall be such part of the
consideration properly attributed to it.
Value of Imported Goods – the value of imported taxable goods is the amount
which is equal to the price of the goods imported which includes:
All taxes, duties and other charges levied either outside or by reason of importation
into Nigeria, but do not include VAT imposed by the VAT Act.
All costs by way of commission, parking, transport and insurance up to the port or
place of importation.
Records and Accounts – a registered VAT payer must keep records and books of
all transactions, imports and other activities relating to taxable goods and services
sufficient to determine the correct amount of VAT due. Such records must include
VAT invoices. These records must be kept up-to-date to enable the tax authority
verify the returns filed. Consequently record should be preserved for reasonable
length of time.
Collection of Tax by Taxable person – a supplier of goods or services shall collect

VAT on goods or services at the rate specified by law. This is output VAT. The
output VAT less input VAT suffered on those goods or services is remitted by the
I
tax payer to FIRS. An importer of taxable goods, shall, before clearing those goods
pay to the FIRS or its agent (custom and excise) the VAT on those goods.
Input VAT Allowable

Input VAT allowable against output VAT is limited to the tax on goods purchased
or imported for resale and goods which form the stock in trade used for direct
production of any new product on which outpour VAT is charged
Input VAT on any overhead, service and general administration of business which
can be expensed in P&L account, is not allowed as a deduction from output VAT.
Input VAT on any capital item and asset which is to be capitalized along with the
cost of the capital item and asset is not allowed as a deduction from output VAT
Non-manufacturing business are to be treated accordingly.
VAT SHARING FORMULA

The formula for the sharing of VAT proceeds has changed over a period of time,
since the implementation of VAT in 1995. It has undergone the following series of
changes.
1995 1996 1997 1998 to date
Federal govt 50% 35% 35% 25% 15%
State govt 25% 40% 40% 45% 50%
Local govt 25% 25% 25% 30% 35%
100 100 100 100 100
VAT Circular is not a substitute for the statute. It is therefore not a legal
document but simply a guide to ease compliance with the procedure and
requirements in the administration of Value Added Tax (VAT) on imports.
Value Added Tax is a consumption tax on economic operations including imports

which in this context means goods and services brought from abroad into Nigeria.
Imported goods may be tangible (i.e. raw materials as industrial input and finished
goods are imported by post at the post, office or the place where the goods are
received in Nigeria. In the case of intangible assets, the VAT point of import is the
place in Nigeria where payment is due.
VAT Point of Import

The VAT point of imported goods is the relevant port or border post. Where the
goods are imported by post at the post, office or the place where the goods are
I
received in Nigeria. In the case of intangible assets, the VAT point of import is the
place in Nigeria where payment is due.
Registration
All non-exempted goods imported into Nigeria will be charged with VAT whether or not
 The goods have attracted customs duty.
 The person importing the goods is registered for VAT.
Normally, private citizens who are themselves final consumers will not be
expected to register for VAT.
All commercial importers are regarded as making supplies for a consideration in

Nigeria (either by selling the goods or using them as inputs) and will be
registerable under normal rules.
For any new commercial importer who has not registered for VAT, he is
registerable when his first consignment is cleared at the port for entry purposes.
Unregistered persons cannot claim VAT refund for VAT paid at importation.
VATable Imported Service
Any services received from outside Nigeria other than those listed in the list of
exempted goods and services attract VAT at the normal rate of 5%. In other words,
Value Added Tax is calculated and payable on the amount due to the foreign
supplier of items such as consultancy services, patent, royalty, franchise etc. Credit
will however be given for the VAT paid if the service is an input to an output
service.
Exempted Goods and Services
Goods and Services exempted from VAT when sold or bought are also generally exempted
from VAT on importation.
The list of exempted goods and services are as given below. They have been
expanded to align them with the product code assigned to each of them by the
Nigeria Customs Service. All export products are zero-rated.
(i) Exempted Goods

a. Medical and Pharmaceutical Products;
b. Basic food item;
c. Newspaper and Magazines;
I
d. Books and Educational materials;
e. Baby products
f. Commercial vehicles and their spare parts; and
g. Fertilizer, agricultural and veterinary medicine, farming machinery
and farming transportation equipment.
(ii) Exempted Services
a. Medical/Veterinary Services
b. Services rendered by Community Banks, Peoples Banks and
Mortgage Institutions; and
c. Play and performances conducted by educational institutions as part of
learning
Zero – Rated items are Vatable goods whose applicable rate is zero percent (0%)
and the Implication is that a refund of the VAT input is due.
VAT FORM 001 – is a VAT registration form in 2 parts A + B, the form is to be

completed by all VATable persons for VAT. The explanatory Notes at the back of
the form are also part of the form.
Part A is in 3 sections. Section 1(a) – (d) has the following items.
Name of VATable person, Place of business and not a P. O. Box, telephone and
E-mail address, TIN and date of incorporation or registration of business. Section 2
is about the nature of business and type of goods and services. Section 3 required
the person to provide the date of commencement of business.
Part B is merely on certification. The signature of the principal officer of the
VATable person is to be affixed. Other items on part B are the full names of the
VATable person, Official Stamp, designation and date.
The Explanatory Notes at the back of the form interprets the following terms
VATable Person, Place of Business, Incorporation, Registration Number, Goods
and Services, Date of Commencement of Business and Principal Officer.
VAT FORM 002

- Is a VAT Return form in duplicate, white and pink copies
- The form is to be completed by a VATable person to show the transactions
involving VAT for every month and remittance statement.
- The white copies are to be sent to the relevant tax office together with the
payment due. While the duplicate copy (the pink) is retained by the VATable
I
person for record purpose. There is an illustration to the VAT return form in 15
boxes. The boxes show details on supplies, purchases VAT deduction, VAT on
imports, total VAT payable, total deductions etc. Two signatures will appear on the
declaration part of the form to the effect that the particulars in this returns are true
and correct. The VATable persons sign as well as the Tax Controller. Details on
the e-ticket which has been checked by the controller will also appear on the form.
The form must be completed and sent to the tax office even if no VATable supplies
have occurred.
VAT FORM 003

This is the VAT return form completed by the tax office and sent to the regional
office in a month.
VAT FORM 004

This is the VAT return form sent by a regional office for VAT collection to the
Head office in Abuja
VAT FORM 005

Used to render returns and VAT collections made to the Federation Account in a
given period.
VAT FORM 006

Used by Nigerian Custom Service to show VAT collected by the Service on a
monthly basis
Determination of Value
The value of imports on which VAT is payable is governed by the following:
(i) Basis of Value: The taxable value of goods imported into Nigeria
is normally the price payable in money for the goods (if there is no
other consideration) plus, if not already included in the price, the
following:
(a) any customs duty or levy payable on importation;
(b) any excise duty or other charges payable on imports into Nigeria
(except the VAT itself) and
(c) all commission, packing, transport and insurance costs incurred up to

the period of legal entry of the goods into Nigeria.
I
In other words, VAT is to be charged in addition to customs duties and all other
charges that may be made at the port. It is to be calculated on the total of the cost,
insurance and freight (CIF) plus customs duties and all other charges on the
imported goods.
(ii) Amount expressed in foreign currency is to be converted into naira

using the rate of exchange adopted by the Nigeria Customs Service
(NCS)
(iii) Where no price in money is payable, for the goods or the price
payable at importation is not the sole consideration, the taxable value
of the goods is the open market value.
Classification of Goods by Product Code
Goods imported into Nigeria are classified by product codes as contained in the
NCS Harmonised System Code for the purpose of AT collection. Only the
product codes of exempted items are listed in this Circular. They are as contained
in appendix 1.
Any other imported items outside those listed in appendix 1 are VATable.
Designated Points of Entry
The list of designated points of entry into Nigeria are as contained in appendix II
to this Circular. They include ports for arrival and departure of ship by sea, airports
in Nigeria for arrival and departure of aircrafts and certain border routes in Nigeria
as approved border stations for the arrival and departure of aircrafts and certain
border routes in Nigeria as approved border stations for the arrival and departure
by land.
Rated
The rate of VAT for imports is 5%. Exports are zero-rated
The Right of Appeal
If an importer disagrees with an assignment of the VAT payable on an imported

consignment, he has a right of appeal to Integrated Tax Office (ITO) and Federal
I
Inland Revenue Service in that order. These are administrative review channels..
The taxpayer, if not satisfied can make further appeal to the Federal High Court.
Assessment
For importations other than by post, VAT assessment becomes due when the
Nigeria Customs Service (NCS) legally accepts the import declaration on entry of
goods or, where port entry is not involved, at the time of legal importation.
Returns
An importer of taxable or non-taxable goods and services is to render a return to

the integrated Tax Office (ITO) closest to him on VAT form 002 on or before 21st
day of the month following that in which the import was made.
The return is to be used to cross check the monthly return to be rendered by the
Nigeria Customs Service (NCS).
Payment
An importer does not have to wait for the rendering of returns before paying his
VAT – since the VAT must be paid along with customs duties and other charges
before the goods can be cleared at the ports. The NCS’s Bill of Entry is designed
to accommodate the column for the assessment of VAT on the import
In other words, the VAT for each imported consignment must be in bank cheque
or draft at the same time the customs duties are being paid and not later. The
bank certified cheque/draft should be drawn on ―Federal Government of Nigeria
– F.I.R.S – VAT Account.”
Input Tax
The VAT payer who imports for manufacture or as input to further production or
processes can claim as credit the input tax paid on his import along with those paid
on goods purchases in Nigeria.
The claim for input tax must be made on the VAT returns for the month the
importation was effected. It needs not wait for the time the imported materials are
used or sold. If an importer imports goods that are not to be used for business, he
still has to pay VAT.
I
Evidence of Input Tax
To claim credit for input tax, an importer must submit acceptable evidence such as:
i. The Bill of Entry;

ii. The Treasury Receipt issued by the Nigeria Customs Service;
iii. The attested invoice issued by the manufacturer or the supplier or
exporter of the goods as the case maybe.
These are documentary evidences required to claim input tax and conduct VAT
audit and investigation where applicable.
Rendition of Collection Return by the NCS
The Nigeria Customs Service is to render, on monthly basis, returns of VAT which
it has collected and paid to the Central Bank of Nigeria.
These returns are to be rendered by each point of entry to the nearest local VAT
office on or before 21st day of the month next following that for which the returns
was being submitted.
In making the returns, the Nigeria Customs Service in each point of entry must
include:
i. the number of the Bill of entry.

ii. the total value on which VAT was charged
iii. the VAT charged
iv. the remittances
I
1 a. Customs administrations throughout the world perform a number of vitally
important tasks on behalf of their Governments and contribute to national goals.
Enumerate four (4) benefits of Customs to national goals.
b. The presence of corruption can severely limit Customs and relevant tax
authorities to effectively accomplish that mission. Identify six (6) effects of
corruption in a country.
SUGGESTED SOLUTION
1A
1. Customs help in revenue collection by collecting taxes e.g. VAT on goods
and services
2. Protects the community by debarring prohibited goods from being imported
into the country. - Aids trade facilitation between countries and - Protection
of national security
3. Reduction in foreign investment
4. Revenue leakage and fraud
1B
a) Reduction in national security and community protection.
b) Increased costs which are ultimately borne by the community
c) Maintenance of barriers to international trade and economic growth.
d) Reduction in public trust and confidence in Government institutions.
e) Reduction in the level of trust and co-operation between customs
administrations and other Government agencies
f) Reduction in the level of voluntary compliance with customs laws and
regulation
g) Low staff morale and ―espirit de corps‖.
h) Promote bad governance - Aids capital flight
2. a. In accordance with the Standards for provision of Taxation Services 3, ―who

is a taxpayer‖?
b. Give four (4) examples of situation where information may be known to a
CITN member from the returns of another taxpayer.
c. For the purposes of the Customs valuation agreement, list out four (4)
conditions in which persons shall be considered related.
d. What do you understand by the term ―general expenses‖ as contained in Article
5 of the Customs valuation agreement?
SUGGESTED SOLUTION 2 a
I
a. Taxpayer is a client, a member‘s employer or any other third party recipient
of tax services.
b. Husband and wife
- Trustees and beneficiaries
- Group of companies
- Employers and employees
c. They are officers or directors of one another‘s business
- They are legally recognized partners in business
- They are employers and employees
- Any person directly or indirectly owns, controls or holds 5% or more of
the outstanding voting stock or shares or both of them.
- One of them directly or indirectly controls the other.
- Both of them are directly or indirectly are controlled by a third person
- Together they directly or indirectly control a third person or
- They are members of the same family.
d. General expenses include the direct and indirect costs of marketing the goods
in question.
e.
a. According to Value Added Tax Act, describe zero rated items.
b. Enumerate the purposes and usefulness of the following major
FORMS used in Value Added Tax operation in Nigeria:
i. VAT Form 006
ii. VAT Form 004
iii. VAT Form 001
iv. VAT Form 003
v. VAT Form 002
vi. VAT Form 005
c. A VATable product was sold by a wholesaler to a retailer at a price of

N620,000. The manufacturer purchased its major inputs for N450,000.
The product eventually got to the final consumer at a price of
N820,000.
You are required to compute the total VAT payable for the period.
I
SUGGESTED SOLUTION 3.
Zero – Rated items are Vatable goods whose applicable rate is zero percent (0%).
The Implication is that a refund of the VAT input is due.
VAT FORM 001 – VAT Registration Form Is a VAT registration form. In 2 parts
A + B. The form is to be completed by all VAT able persons for VAT. The
explanatory Notes at the back of the form are also part of the form.
Part A is in 3 sections. Section 1(a) – (d) has the following items.

Name of VAT able person, Place of business and not a P. O. Box, telephone and
E-mail address, TIN and date of incorporation or registration of business. Section 2
is about the nature of business and type of goods and services. Section 3 required
the person to provide the date of commencement of business.
Part B is merely on certification. The signature of the principal officer of the VAT
able person is to be affixed. Other items on part B are the full names of the VAT
able person, Official Stamp, designation and date.
The Explanatory Notes at the back of the form interprets the following terms VAT
able Person, Place of Business, Incorporation, Registration Number, Goods and
Services. Date of Commencement of Business and Principal Officer
VAT FORM 002

- Is a VAT Return form in duplicate, white and pink copies.
- The form is to be completed by a VAT able person to show the transactions
involving VAT for every month and remittance statement.
- The white copies are to be sent to the relevant tax office together with the
payment due. While the duplicate copy (the pink) is retained by the VAT able
person for record purpose. There is an illustration to the VAT return form in 15
boxes. The boxes show details on supplies, purchases VAT deduction, VAT on
imports, total VAT payable, total deductions etc. Two signatures will appear on the
declaration part of the form to the effect that the particulars in this returns are true
and correct. The VAT able persons sign as well as the Tax Controller. Details on
the e-ticket which has been checked by the controller will also appear on the form.
- The form must be completed and sent to the tax office even if no VAT able
supplies have occurred.
I
VAT FORM 003 This is the VAT return form completed by the tax office and
sent to the regional office in a month.
VAT FORM 004

This is the VAT return form sent by a regional office for VAT collection to the
Head office in Abuja
VAT FORM 005

Used to render returns and VAT collections made to the Federation Account in a
given period.
VAT FORM 006

Used by Nigerian Custom Service to show VAT collected by the Service on a
monthly basis
3c
Computation of Total VAT Payable
i. Computation of Total Output VAT

N
Sales Value 820,000
VAT Output @ 5% 41,000
ii. Computation of Total Input VAT

Cost of Input 450,000
VAT Input @ 5% 22,500
iii. Computation of Total VAT Payable

VAT Output 41,000
Less:
VAT Input 22,500
VAT Payable 18,500
Workings
1) 5% X 820,000 = 41,000
2) 5% X 450,000 = 22,500
I
Toilet Approach Nigeria Enterprises is a company engaged in hospitality services
to both corporate organisations and individuals.
The company prepares accounts up to 31st December, every year and it is a
registered VAT agent to the Federal Inland Revenue Service. After examining its
records and books for 2014, its VAT accounts showed the following:
VAT Accounts
N N
VAT charged on food and drinks 1,540,000
VAT charged on accommodation 2,510,000
VAT charged on other services 910,000
4,960,000
VAT paid on kitchen materials 880,000
VAT paid on drinks for resale 100,000
VAT paid on Furniture
and rooms equipment 125,000
VAT paid on legal and
professional services 45,000
VAT remittance to FIRS 2,000,000
3,150,000
Balance as at 31/12/2014 1,810,000
Required:
(i) Compute the total amount of VAT due to FIRS for December 31, 2014.
(ii) Ascertain the balance remittable for that year.
SOLUTION TO QUESTION
TOILET APPROACH NIGERIA LIMITED COMPUTATION OF TOTAL

AMOUNT OF VAT TO FIRS AS AT 31/12/2014
Amount of VAT Collected for FIRS:
N
VAT on foods 1,540,000
VAT on accommodation 2,516,000
VAT other services 910,000
4,960,000
Less: VAT on kitchen Materials for resale 880,000
VAT on drinks for resale 100,000
980,000
Vat due to FIRS 3,980,000
I
Assume that for the 2015 fiscal policy, the Government has decided that any
importer who made false declaration of the goods imported will be charged double
of the correct customs duties due for the particular goods, so as to serve as a
deterrence to the fraudulent practice. SITTING APPROACH NIG LTD a
company that has been an importer for many years decided to cut-corners by
making false declaration of the contents of the two containers.
When the Customs Officer examined the two containers they were found to
contain one new vehicle each hidden within the raw materials declared.
Customs duties chargeable on goods include the following:-
1. Import duty on raw materials is at 5% on the cost,
insurance and freight, while that of a new motor car is
75% on (c.i.f.).
2. 7% surcharge calculated on the import duty of both
items.
3. 1% comprehensive import supervision scheme charge on
the free-on-board value of both the raw materials and the
car.
4. 0.5% ECOWAS trade liberalization Scheme Levy on
import duty. Note Naira exchanges at N200 to the US
dollar.
5. VAT at 5% on the total of (a) to (d) above for both items.
6. Other levies:- include nominal port charges of N10,000
per container.
The following cost applies per container:
RAW MATERIALS NEW CAR
$ $
Cost 50,000 100,000
Insurance 1,000 2,000
Freight 2,000 4,000
53,000 106,000
Required: Calculate the customs duties chargeable by SITTING APPROACH
NIG LTD on the discovery of the false declaration.
I

Citn New Professional Syllabus - Indirect Taxation

Uploaded by

Document Information

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Citn New Professional Syllabus - Indirect Taxation

Uploaded by

Copyright:

Available Formats

INDIRECT

C. PREFERENCES - IMPORT AND EXPORT

D. EXPORTS OUTSIDE THE ECOWAS

PART 3: BETTING DUTIES

PART 4: VALUE ADDED TAX

PART 5: NIGERIAN TAXATION STANDARD

1.1. Definition of Direct Tax

There are several types of Direct Taxes, such as:

Personal Income Tax

1.2. Definition of Indirect Tax

There are several types of Indirect Taxes, such as:

1.3. ARGUMENTS FOR AND AGAINST INDIRECT TAXES

 Indirect taxes are less likely to

 Revenue from indirect taxes can be uncertain

 There is a loss of welfare from duties e.g.

 Indirect taxes provide an incentive  Higher indirect taxes affect households

1.4. Comparison Chart

1.4.1.5. DIFFERENCES BETWEEN DIRECT AND INDIRECT

2.2. CUSTOMS VALUATION

2.2.2. Use the Valuation Methods

 In contrast, an ad valorem duty depends on the value of a good. Under this

2.4.1. Brussels definition of value

2.4.2. Tokyo Round Valuation Code

2.4.3. The new Agreement

2.6. The 6 Methods

2.6.1. Method 1 — Transaction value

2.6.1b. Conditions to be fulfilled

b. No restriction on the disposition or use - There must be no restriction on

c. It should not be subject to additional conditions - The sale or price must

d. Full prices must be disclosed - No part of the proceeds of any subsequent

2.6.1c. Related parties

2.6.2. Method 2 — Transaction value of identical goods

The definition excludes imported goods which incorporate engineering, artwork

2.6.3. Method 3 — Transaction value of similar goods (Article 3)

2.6.4a. Determination of the greatest aggregate quantity sold

2.6.4b. Deductions from the price at the greatest aggregate quantity

2.6.5b. Production cost = value of materials and fabrication

2.6.5c. Profit and general expenses

2.6.5d. Other expenses to be added

2.6.6b. Valuation criteria not to be used

b. Technical Committee on Customs Valuation

3.0. CUSTOMS ADMINISTRATION

 Customs help in revenue collection by collecting taxes e.g. VAT on goods

3.2. Effects of corruption to the economy

3.3. Some of the benefits of destination inspection are listed below:

3.4. Responsibilities of Importers as required by the Nigerian Customs Service

3.5. Goods lost, damaged or defective.

3.6. Evidence of loss, damage or defective goods

3.7. Revised customs value

3.8. Goods are found to be defective after importation

3.9. Duties and Taxes Applicable outside the ECOWAS

3.10. Charges that can be excluded

3.11. Benefits of the Agreement (GATT)

3.12. Methods of disposing goods by the NCS:

4.1. Tariffs are duties or taxes imposed by government on selected imported

The following are the bases for imposing tarrifs:

4.3. TARIFF CLASSIFICATIONS

4.3.1. Tariffs are usually grouped under three headings:

4.4. BASES FOR LEVYING TARIFFS:

5.3. What preferences are and how they work

5.4. Eligibility for import preferences

5.5.1. CATEGORY OF CERTIFICATES OF ORIGIN

5.5.2. APPLICATION FOR THE CERTIFICATE OF ORIGIN

5.5.3. The Concept of Origin