November 2, 2022
On 1 September 2022, the Federal Inland Revenue Service (FIRS or “the Service”) issued an Information Circular to the general public to provide clarification on the administration of the National Agency for Science and Engineering Infrastructure (NASENI or “the Agency”) Levy.
The NASENI Levy was introduced by the NASENI (Establishment) Act Cap N3 LFN, 2004 (NASENI Act) in 1992, but had not been enforced prior to the enactment of the Finance Act, 2021, as there had been no clear guideline on the administrative procedure for the imposition and collection of the levy.
To resolve this issue, Section 20(2)(b) of the NASENI Act (as amended by the Finance Act, 2021) imposed a 0.25% levy on the profit before tax of commercial companies and firms with turnover of N100,000,000 and above covering the banking, mobile telecommunication, ICT, aviation, maritime and oil and gas sectors. The Section also provided that the NASENI levy will be collected by the Federal Inland Revenue Service (FIRS) and credited to the account of NASENI.
In line with the foregoing, the Circular provides that the NASENI levy will apply to both resident and non-resident companies who meet the N100,000,000 turnover threshold and are subject to tax in Nigeria in the sectors listed above. To provide further clarity on the specific sectors, the Circular provides the following description for companies required to comply in each sector:
The Circular also provides the following:
(Click here to access the circular)
This Circular provides much needed clarification on the administrative guidelines for the imposition and remittance of the NASENI levy. However, it raises some additional concerns for taxpayers. For example, although the Circular provides that penalties will apply to defaulting companies, the NASENI Act contains no provisions with respect to penalties for failure to comply with its requirements. It may, however, be argued that the omnibus penalty provisions under the FIRS (Establishment) Act which provides for a penalty of N50,000 and/or a 6-month imprisonment term may be applicable for such default that does not attract any specific penalty in the FIRS (Establishment) Act. This argument may be tenable as the NASENI levy is now under the purview of the FIRS and thus any provisions of the Act which apply to other taxes administered by FIRS will apply to the NASENI levy, even though the NASENI Act was not specifically mentioned in the FIRS (Establishment) Act.
Another area of concern for taxpayers is that although Section 22 of the NASENI Act clearly states that “…all contributions to the Fund of the Agency are tax deductible”, the Circular seems to contradict this position by stating that the NASENI levy is not tax deductible in determining the assessable profits under the CITA. It is our opinion that the position of the FIRS on the non-deductibility of the NASENI levy may not be in line with the law and could be challenged in court. It is, however, likely that the FIRS will interpret “contribution” narrowly to exclude the payment of the levy, which may be deemed not to be a “contribution” (i.e. not voluntary). One other issue that would also need to be clarified is the dispute resolution process for disputed assessments of the levy, as the NASENI Act is not listed as one of the laws upon which the Tax Appeal Tribunal (which adjudicates tax disputes with the FIRS) can adjudicate. It therefore remains to be seen whether disputes can be validly taken before the TAT or will go to the Federal High Court, which is empowered to hear all matters relating the revenue of the Federation.
While we await further clarification or developments on the NASENI levy, it is important for taxpayers to engage with their consultants to understand the ramifications of the levy and the required compliance processes in order to avoid incurring sanctions such as fines and penalties.