January 16, 2018
Statutes of limitations are provisions within laws which set the maximum time after an event within which legal proceedings may be initiated. The statute of limitation is a common practice in global tax systems. However, its application and specific provisions vary per jurisdiction.
In the Nigerian tax system, the statute of limitation refers to the maximum period after which the Relevant Tax Authority (RTA) can assess a taxable person to tax in respect of a certain year of assessment (YOA).
One of the key functions of the Nigerian tax authorities is to audit, assess and collect the relevant taxes due from taxable persons in Nigeria. Nigerian tax legislation provides for the issuance of additional tax assessments to taxable persons within six (6) years after the expiration of a YOA, where the RTA discovers or is of the opinion that tax has not been assessed, or has been under-assessed. There are essentially in pari materia provision in the Personal Income Tax Act (PITA), Companies Income Tax Act (CITA), Petroleum Profits Tax Act (PPTA); and the Federal Inland Revenue Service (Establishment) Act 2007 (the Acts).
The implication of the above is that the RTAs only have six years after the relevant accounting period to assess a taxable person to additional tax. However, the above tax laws further provide that where any form of fraud, wilful default or neglect has been committed in connection with any tax imposed by the Acts, the six years limitation would not apply, and an investigation may be instituted by the RTA. Unfortunately, the Acts do not make any provision with respect to whose responsibility it is to prove a case of fraud, wilful default or neglect, before an investigation can be instituted. Therefore, does the assumption of fraud, wilful default or neglect by the RTA mean they can go as far back as they want to review, assess and collect tax from a taxpayer? This also begs the question as to whether there is really a statute of limitation in Nigeria’s tax laws.