Journal of
Accounting and Taxation

  • Abbreviation: J. Account. Taxation
  • Language: English
  • ISSN: 2141-6664
  • DOI: 10.5897/JAT
  • Start Year: 2009
  • Published Articles: 117

Article in Press

TAX TREATMENT OF RECHARGES UNDER TURNOVER ASSESSMENT UNDER THE COMPANIES INCOME TAX ACT

Ukpebor Maxwell

  •  Received: 30 March 2016
  •  Accepted: 05 June 2016
The object of this article is to examine an issue that has caused so many controversies in Nigeria in the last decade i.e. Tax Treatment of Recharges on Assessment based on Turnover in cross border transactions. The Federal Inland Revenue Service (FIRS) has the discretion to subject a fair and reasonable percentage of the Turnover of a company to tax at the rate of 30% thus giving rise to an effective tax rate of 6%. Where a non - resident company carries on any business in Nigeria, it usually does so directly or indirectly through local entities (mostly subsidiaries set up for purpose). These subsidiaries normally incur costs that will be recharged to the non - resident company. The tax treatment of these costs in the hands of the non - resident company under Turnover Assessment is not yet settled. While FIRS is of the view that tax payers cannot treat Recharges or any other expenses as allowable against the 20% of the Turnover deemed to be assessable profits of the company, the taxpayer views it differently. This calls for the interpretation of Section 30 of the Companies Income Tax Act.1 It is our expectation that this article will clarify this issue.

Keywords: Tax Treatment, Turnover deemed, assessable, Income Tax Act