Nigeria - Double Taxation Agreements Come Into Effect

Early this year the Federal Government passed necessary subsidiary legislation to bring into force the double taxation agreements which it had entered into with the governments of Pakistan, Belgium, France, Canada, Romania and the Netherlands, respectively. As these agreements had been signed several years ago they are to take effect retrospectively from the following dates:

• Pakistan - 1st January 1990
• Belgium - 1st January 1990
• France - 1st January 1991
• Canada - 1st January 1993
• Romania - 1st January 1993
• Netherlands - 1st January 1994.

Each of the agreements covers the following Nigerian taxes:

• personal income tax;
• companies income tax;
• petroleum profits tax; and
• capital gains tax.

Also, each agreement deals with issues such as the meanings of the terms 'Fiscal Residence' and 'Permanent Establishment'; as well as indicating in which of two contracting states the following may be taxed:

• 'Income from Immovable Property'
• 'Business Profits'
• 'Shipping and Air Transport'
• 'Associated Enterprises'
• 'Dividends'
• 'Interest'
• 'Royalties'
• 'Capital Gains'
• 'Dependent and Independent Personal Services'
• 'Director's Fees', and
• 'Pensions and Annuities'.

The focus of each of the agreements is essentially to provide that a contracting state give credit for taxes paid in the other contracting state. Provision is also made for the exchange of information between the taxation authorities of contracting states.

Note: Until this time the only double taxation agreement which had come into force was the agreement with Great Britain which came into force on the 5th of July 1988.