The Tax Appeal Tribunal, Lagos Zone has declared as illegal, null and void the decision of ECO Bank Nigeria Limited to pay N5,545,000,000 as dividends to its shareholders in a year the bank claimed it made no taxable profit and rather declared losses from its banking operation.
\nThe tribunal reached this decision in its judgement dated February 20, 2020 which it delivered in Appeal No. TAT\/LZ\/CIT\/024\/2018.
\nAccording to details of the judgment made public in a statement by Dr. Abdullahi Ismaila Ahmad, the FIRS Director, Communications and Liaison Department , ECO Bank was ordered to pay at least N1,663,500,000 to the Federal Inland Revenue Service (FIRS) as Company Income Tax for the year in dispute – 2016
\nECO Bank had dragged the Federal Inland Revenue Service (FIRS) to court over the insistence of the Service that the bank must pay in full its excess dividend tax liability of N2,079,375,000, inclusive of interest and penalty for the Year of Assessment (YOA) 2016.
\nBut ECO Bank argued that the dividend it paid out was tax exempt as N4,372,244,556 out of the total sum was \u201cprofit from bonds and treasury bills\u201d, which was not taxable based on the provisions of the Company Income Tax (Exemption of Bonds and Short-Term Government Securities) Order, 2011.
\nAdmitting to only making N1,172755,444 \u201ctrading profits\u201d from other business sources, ECO Bank decided that it would only pay N351,826,663 tax to the FIRS, which it paid the Service after some months of delay.
\nHowever, the FIRS \u201cdemanded for the immediate payment of the outstanding excess dividend tax liability of N1,311,673,367\u201d from the bank, which impasse led to suit before the tax tribunal.
\nIn its argument before the court, ECO Bank presented three issues for determination, namely whether the FIRS \u201cwas correct to assess the Appellant to tax under Section 19 of CITA\u201d when the income earned was \u201cfrom Bonds, Treasury Bills and other Government Securities\u201d; whether the FIRS \u201cmisdirected itself by failing to take account the CIT paid by the Appellant\u201d; and \u201cwhether by the rules of Interpretation of Statutes, the Respondent has erred in law in its application of Section 19 of CITA\u201d.
\nIn its consideration of the three issues raised, the tax tribunal resolved them in favour of the FIRS. It held that \u201ccompanies that invest in bonds will, by virtue of the tax exemption, become liable to pay excess dividend tax on their profits.\u201d
\nThe court averred that \u201cif the tax exemption granted by the order (Company Income Tax (Exemption of Bonds and Short-Term Government Securities) Order, 2011) creates an excess dividend situation\u201d ECO Bank or any other company \u201cshould be liable to pay excess dividend tax on the same income that otherwise would have been exempted from tax.\u201d
\nThe tribunal stressed that \u201ca liability to pay excess dividend tax arises where a company that seeks to pay dividend has no taxable profit as in the instant case but has distributable profit that is higher than the taxable profit.\u201d
\nThe tribunal also held that the FIRS properly directed itself by not failing \u201cto take into account the sum already settled by the Appellant\u201d (ECO Bank) in the Service\u2019s \u201ctotal assessment of N1,663,500,000.\u201d
\nAddressing the final issue for determination, the tax tribunal headed by Prof. A.B. Ahmed also found that the FIRS did not err \u201cin law in its application of Section 19 of CITA,\u201d stressing that the law was enacted to address the \u201cmischief\u201d which corporate entities resort to as tax avoidance schemes under which they twisted \u201cthe law to suit their own ends\u201d, especially to \u201cprevent shareholders from sharing dividend without payment of tax for whatever reason.\u201d
\nConsequently, the tribunal declared that the ECO Bank \u201cappeal fails and is hereby dismissed.\u201d<\/p>\n","protected":false},"excerpt":{"rendered":"
The Tax Appeal Tribunal, Lagos Zone has declared as illegal, null and void the decision of ECO Bank Nigeria Limited to pay N5,545,000,000 as dividends to its shareholders in a year the bank claimed it made no taxable profit and rather declared losses from its banking operation. The tribunal reached this decision in its judgement […]<\/p>\n","protected":false},"author":7,"featured_media":24514,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[4,7],"tags":[1152,125,375],"class_list":["post-24924","post","type-post","status-publish","format-standard","has-post-thumbnail","category-business","category-news","tag-avoidance","tag-firs","tag-tax"],"_links":{"self":[{"href":"https:\/\/everyday.ng\/index.php?rest_route=\/wp\/v2\/posts\/24924","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/everyday.ng\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/everyday.ng\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/everyday.ng\/index.php?rest_route=\/wp\/v2\/users\/7"}],"replies":[{"embeddable":true,"href":"https:\/\/everyday.ng\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=24924"}],"version-history":[{"count":0,"href":"https:\/\/everyday.ng\/index.php?rest_route=\/wp\/v2\/posts\/24924\/revisions"}],"wp:attachment":[{"href":"https:\/\/everyday.ng\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=24924"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/everyday.ng\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=24924"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/everyday.ng\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=24924"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}