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Introduction

It is becoming more common to find civil disputes having Police participation in contravention of the provisions of the existing applicable Laws. Recent legislation on this matter, like the Administration of Criminal Justice Act, 2015 remain blurred in day-to-day activities.

A brief examination of some of the existing Statutes and Case Law regarding Human Rights and the powers of the Police to arrest a person with or without a Warrant are provided in the following paragraphs

Human Rights Protection.

Nigeria is a signatory to both the United Nations Declaration of Human Rights, and the African Charter on Human Rights. Nigeria has also domesticated both Charters in her local Laws.

In recognition of the atrocities that cumulated into the Second World War, the United Nations Declaration of Human Rights compulsorily require Member States, who are signatories to this Charter, to treat every human being with dignity, and fairly at all times. Thus, Article 9 of this Charter provides that “No one shall be subjected to arbitrary arrest, detention or exile.”

The 1999 Constitution of the Federal Republic of Nigeria (as amended) reiterates the above provisions of the United Nations Charter on Human Rights when it guarantees in Section 35 the right of every person to his or her personal liberty except where such liberty is encumbered or restrained or controlled by the due process of the Law; i.e. the execution of a Court Order or Judgment.

The personal liberty of every person is further enshrined in the Administration of Criminal Justice Act, 2015 (“ACJA”) by among other things, guarantee to every person the right to remain silent and not answer any questions until a Lawyer or such other person of the person or suspect’s choice is present.

Protocols of Arrest

Section 4 of the Police Act empowers the Police to detect and prevent the commission of any crime, apprehend any suspected offender, preserve the Law, protect lives and properties, etc.

In the performance of its duties, the Police must ensure that it adheres to various Human Rights Protection Protocols, some of which include mandatorily informing a Suspect of the ground or grounds for an arrest except where the offence was actually committed in the presence of a Police Officer or the Suspect was fleeing the scene of the commission of an offence or escaping prior lawful custody.

A Suspect arrested by the Police also has the constitutional right to remain silent and avoid answering any question until he or she has consulted a Lawyer or any other person of his choice. The Police are also required to inform a Suspect’s next of kin or relative of any arrest, at no costs to the Suspect or the Suspect’s relatives.

The practice of a person being arrested in place of a Suspect is now prohibited by Law. A Suspect shall also not be arrested merely for committing a civil wrong or breaching a contract.

Lastly, Section 8 of the ACJA provides that every suspect shall be accorded humane and dignified treatment whilst in the custody of the Police. And no Suspect shall be subjected to any form of torture, cruel, inhumane or degrading treatment.

Warrants and Release

The commonly accepted practice is for a Suspect to be arrested with a Warrant signed by a Judge or Magistrate. At a preliminary investigative stage, a letter of invitation from the Police may be served on a person of interest.

As discussed above, where the Suspect commits the offence in the presence of a Police Officer, or flees the scene of the commission of the offence, or from lawful custody, such a Warrant of arrest may not be necessary or required.

Where a person is arrested without a Warrant for a non-capital offence, which offence is not punishable by death, and it is impracticable to arraign such a Suspect before a Court of Law with competent jurisdiction over such a matter, such a Suspect must be released on administrative Police Bail within twenty-four (24) hours of such an arrest.

A release on bail must be on reasonable conditions which ensure that the Suspect is produced whenever required in the future.

Where a Suspect, in a non-capital offence is not released with twenty-four (24) hours after arrest, a Court with competent jurisdiction can on a proper application been made on the Suspect’s behalf, order the release of such a Suspect on bail, on such conditions as the Court deems appropriate.

Case Law on Police Arrest and Contracts

Nigerian Courts have consistently held that it is unlawful for the Police to be involved in any way, in the interpretation or enforcement of contracts; and of any other civil dispute. In the case of McLaren v. Jennings, the Court of Appeal held in 2003 that it was unlawful for the Police to arrest and detain the Appellant with regard to the collection of a debt; this is as under the Law, the Police is not a debt collection Agency.

In addition to damages being awarded for any unlawful arrest and detention, an aggrieved person also has a right, under the Law of Tort, to sue both the Police and the Complainant for malicious prosecution and compensatory damages.

Conclusion

As commendable as the Statutes on this subject are, their correct application and enforcement in day-to-day life, continues to be a mirage, for many reasons. Prominent among these reasons is the lack of public enlightenment of the provisions of the Law on the subject; and the enforcement of the punitive deterrent consequences for any breach of the Law.

Disclaimer

This is a free educational material. It does not serve as a source of solicitation, advertisement or the offering of legal services or advice of any kind. No Client/Attorney relationship is therefore created. Readers are strongly advised to always seek from qualified Legal Practitioners, competent legal counselling to their specific factual situation.

Intellectual Property Protected!

This material is protected by International Intellectual Property Laws and Regulations. This material can therefore only be reproduced or re-distributed for non-profit educational purposes under the strict condition that our Authorship of this material is explicitly acknowledged, and our above Disclaimer Notice is prominently displayed.

Introduction

The economic potential that the Tourism Industry holds, both internally and externally, especially in diversifying the economy away from a mono crude oil export economy, continues to be magnified as the economy slowly recovers from a recession.

One of the recent attempts to harness the opportunities in the Tourism Industry is the second reading of the Nigerian Tourism Development Corporation (Repeal & Re-enactment) Bill, 2017 at the National Assembly. This Bill has elicited a lot of concern from various stakeholders in the Tourism and Hospitality Industry such that an appraisal of some of its provisions will make for a better informed opinion.

Tourism Development Bill

The Nigerian Tourism Development Corporation Bill, 2017 (“NTDC Bill”) seeks to repeal the Nigerian Tourism Development Corporation Act (“NTDC Act”), and in its place establish the Nigerian Tourism Corporation (“NTC”) to among other things develop, promote, regulate, accredit, grade, classify and supervise every aspect of the Tourism Industry in Nigeria.

The NTC Bill further contemplates the establishment of a Tour Operating Company (“TOC”), with offices in each of the six (6) geo-political zones. TOC is to establish tour services within and outside of Nigeria.

Some of NTC’s funding options includes the levying of a Tourism Visa Fee on all in-bound International Travellers to Nigeria; a Tourism Departure Levy on all out-bound Travellers; a Tourism Development Contribution Levy of 1% per Hotel room rate or such flat fee as maybe fixed by NTC; and a Corporate Tourism Development Levy to be charged on the revenue of Banks, Telecommunications and other corporate entities.

Constitution, Case Law and Tourism

In 2010, the Federal Government of Nigeria (“FGN”) challenged the constitutionality of the following statues enacted by the Lagos State House of Assembly:- (i) The Hotel Licensing Law; (ii) The Hotel Licensing (Amendment) Law; and (iii) The Hotel Occupancy and Restaurant Consumer Law. FGN contended that these legislations usurped and undermined the provisions of Section 4(2)(d) of the Nigerian Tourism Development Act.

The Lagos State Government, in response to FGN’s above legal challenge, contended that under the 1999 Constitution of the Federal Republic of Nigeria, Hospitality and Tourism Enterprises, not being among the items in the Exclusive and Concurrent Legislative Lists, were residual matters in which the States’ Houses of Assembly can legislate. To the extent that some of the provisions of the NTDC Act are inconsistent with the provisions of the 1999 Constitutional regarding Tourism and Hospitality regulation, such inconsistency should be held by the Supreme Court to be null and void, and of no effect whatsoever.

The Supreme Court dismissed FGN’s claims in this suit, and unanimously upheld the above submissions of the Government of Lagos State. This is especially as Nigeria operates a Federal System of Government, with each State in the Nigerian Federation enjoying its separateness and independence from the Federal Government.

The Supreme Court further held that by virtue of the provisions of Section 4(1-3) and item 60(d) of Part 1 of the Second Schedule of the 1999 Constitution, FGN can only exercise jurisdiction over Tourist Traffic; and Tourist Traffic the Supreme Court described to include only the ingress and egress of International Tourists from other countries, via visa controls.

Conclusion.

Until the provisions of the above referred 1999 Constitution, which provisions were followed by the Supreme Court in the above case of Attorney General of the Federation v. Attorney General of Lagos State (2013) 7SC (Pt.1) 10 @ 88 – 90, are amended or repealed, the provisions in the NTC Bill regarding the regulation of the Tourism Industry, will if passed into law, again be held to be invalid, null and void once such provisions are challenged in a Court of Law.

Also, most of the financial provisions in the NTC Bill are inimical to the Tourism and Hospitality Industry which is already burdened by multiple and double taxes, a recessed economy with dilapidated infrastructure nationally, an unskilled 21st century compliant manpower pool, aggressive foreign tourism competition for other destinations, etc. Examples of such injurious provisions include a Tourist Visa Fee, a Tourist Development Levy, a 1% per room hotel Tourism Development Levy and a Corporate Tourism Development Levy.

The Federal Government will do well to concentrate on more essential National issues, than on Tourism and Hospitality Regulation which are better managed by States and Local Governments.

Lastly, the above cited Supreme Court decision centered solely on who has the Constitutional authority to legislate on the Regulation, Registration, Classification and Grading of Hospitality and Tourism Businesses in Nigeria. Arguments and a final decision on whether or not the Lagos State Hotel Occupancy and Restaurant Consumption Law can be administered concomitantly or at the same time with the Value Added Tax Act in Lagos State were not made in this case.

The continued application of the Value Added Tax Act and the Hotel Occupancy and Restaurant Consumption Law on the Hospitality Industry needs to be determined by a superior Court of Record as the application of both taxes on the same tax base increases the cost of consumption and jeopardises the growth of the Hospitality Industry. A preferred option will be for the 1999 Constitution to be amended and the Value Added Tax Act to be repealed with States and Local Governments allowed to administer any form of consumption tax in their jurisdiction.

Disclaimer

This is a free educational material. It does not serve as a source of solicitation, advertisement or the offering of legal services or advice of any kind. No Client/Attorney relationship is therefore created. Readers are strongly advised to always seek from qualified Legal Practitioners, competent legal counselling to their specific factual situation.

Intellectual Property Protected!

This material is protected by International Intellectual Property Laws and Regulations. This material can therefore only be reproduced or re-distributed for non-profit educational purposes under the strict condition that our Authorship of this material is explicitly acknowledged, and our above Disclaimer Notice is prominently displayed.

Introduction

The Directors of a company play a very important role - especially in performing oversight functions - in the success or failure of a company. A challenge to Good Corporate Governance Practices however, is in ensuring that only individuals that are competent and experienced in the company’s specific industry are appointed, retained and reasonably remunerated for the services that they render to the company.

What constitutes a reasonable, fair and adequate remuneration to pay to the Directors of a company, for the services that they render to the company, remains a challenge.

Directors’ Remuneration – Corporate Law

The Companies and Allied Matters Act (“CAMA”) describes a Director as a person duly appointed by the Shareholders of a company, to assist in directing and managing the affairs of the company. The remuneration for the services that a Director renders, which are usually in the form of sitting allowances for attending Shareholders, Board and Committee Meetings, is determined by the Shareholders of the company at a Shareholders’ General Meeting (“GM”). The remuneration of the Managing Director of any company is required by CAMA to be determined by the Board of Directors of the company.

The Directors of a company are also entitled to be paid travel, hotel and other out-of-pocket expenses that they properly incur in attending and returning from Board, Shareholders and Committee Meetings. It is however unlawful for any incorporated company to pay to its Directors any remuneration, whether in cash or in kind, free from any applicable Income Tax provisions.

Lastly, every incorporated company must keep a register of all the financial interests that its Directors hold in the company. Examples of such financial interests include the number of shares held, debenture or loan interests, emoluments, compensation and any contract or proposed contract of the company in which a Director has a personal interest. These financial interests are also required to be disclosed in the company’s annual audited Financial Statements and Reports.

The Remuneration Committee Option

In 2016, the Financial Reporting Council (“FRC”) published various Codes on Corporate Governance, some of whose provisions were very controversial. The FRC National Code of Corporate Governance 2016, attempted to “…harmonise and unify all the existing sectoral Codes of Corporate Governance in Nigeria”. Examples of such sectoral codes are the ones for the banking and other financial services, telecommunications, stock market, pensions and insurance operators.

Though the FRC National Code of Corporate Governance is still suspended, one of its recommendations regarding Directors’ remuneration is for every company to establish a Remuneration Committee, which Committee should be composed of a majority of the company’s Non-Executive and Independent Directors.

As CAMA is now about three (3) decades in existence, with no robust statutory protective oversight criteria for determining the remuneration that the Directors of a company should be paid; and with multiple codes of corporate governance for different sectors of the economy; voluntarily creating a consultative Remuneration Committee of which non-executive Directors are in the majority, is in line with present day best corporate governance practice.

Conclusion

Numerous studies have remained inconclusive in providing some standard minimum criteria for determining the quantum of the remuneration to be paid to the Directors of a company, for the services that such Directors render to a company. Also, how the returns on such remuneration should be measured in terms of the Directors’ performance of their duties to the company is also inconclusive.

There is however a consensus that the remuneration for the services that the Directors of a company render to the company must be relative to the company’s size or  turnover, affordability and profitability, the company’s industry specific corporate culture on this subject, the complexity of its operations, etc.

Disclaimer

This is a free educational material. It does not serve as a source of solicitation, advertisement or the offering of legal services or advice of any kind. No Client/Attorney relationship is therefore created. Readers are strongly advised to always seek from qualified Legal Practitioners, competent legal counselling to their specific factual situation.

Intellectual Property Protected!

This material is protected by International Intellectual Property Laws and Regulations. This material can therefore only be reproduced or re-distributed for non-profit educational purposes under the strict condition that our Authorship of this material is explicitly acknowledged, and our above Disclaimer Notice is prominently displayed.

Introduction

The number of commercial transactions that are now denominated in foreign easily convertible currencies, especially the United States Dollars, astronomically increased in the last decade, mostly due to the benefit of retaining earnings in US Dollars, as opposed to the Naira, which is the national currency in Nigeria.

The fall in crude oil prices, which resulted in recession and in the devaluation of the Naira, has however adversely affected US Dollar based transactions most of which are/were sourced and are required to be retired at higher parallel market exchange rates.

Businesses with transactions denominated in foreign currency must therefore familiarise themselves with the minimum tax principles which will impact on such transactions; and in the process, manage the associated Foreign Exchange (“FX”) risks arising thereform.

Taxation of FX Profits

Elementarily, it is the profits of a company, from all its trade or business, and not its revenue or turnover, that is taxed on a preceding year basis. And tax assessments and payments must be in the currency of the transaction.

To earn a profit, a company must deplore resources and incur expenses. However, only the expenses of a company which are wholly, exclusively, necessarily and reasonable incurred in the production or acquisition of such profits enjoy a tax deduction from the company’s revenue before the profits of such a company are taxed. Examples of such expenses include business loans and interest paid on such business loans, business premises rent, office maintenance and repairs, plants and machineries, bad and doubtful debts, salaries wages and emoluments, pensions, research and developments, charitable donations, etc.

Advance earnings however suffer or bear an advance withholding tax at the tax rate of ten per cent (“10%”) for corporate entities; and five per cent (“5%”) for individuals. Receipts or certificates obtained after such withheld tax are usually subsequently used by the earning party to net-off its final tax at the end of the subject financial year of tax assessment.

FX Taxation

The taxation of profits accruing from foreign exchange denominated transactions is usually not contentious as can be deciphered from the above. The same cannot be said of FX losses where the tax authority traditionally and cautionarily is quick to discourage a tax deduction for FX related losses, which losses usually arise from FX rates fluctuations.

A good example of such a contentious situation can be found in the Supreme Court decision in Shell Petroleum Development Company v. Federal Board of Inland Revenue (Shell v. FBIR), which decision was delivered on 27th September 1996. The Supreme Court held in this case that the FX losses that the Appellant suffered were equitably, and following the doctrine of Accord and Satisfaction, tax deductible expenses which were wholly, necessarily and incidentally incurred in the cause of the Appellant abiding with the Agreements it entered into with the Federal Government of Nigeria (“FGN”) in order for the Appellant to continue to undertake its petroleum operations in Nigeria.

The Supreme Court observed in Shell v. FBIR that if the Petroleum Profits Tax (“PPT”) due were paid by the Appellant in Naira, as the Petroleum Profits Tax Act applicable at the time required, the Appellant would not have incurred any foreign exchange losses. The latter would have also occurred if the Respondent’s principal, who is the FGN, had received the PPT in Naira only to suffer FX losses when converting the Naira to British Pounds Sterling.

Accounting Treatment of FX

The International Financial Reporting Standards (“IFRS”) IAS 21 requires a foreign currency transaction to be recorded, on its initial recognition, in the functional or national currency of the concerned company, applying the spot FX rate at the date of the transaction.

IFRS IAS 20 goes further to require that at the end of each reporting accounting year-end, the foreign currency monetary items are required to be converted into the functional or national currency using the closing FX rate for the currency of the transaction.

Any resulting exchange rate difference – the FX rate at the date of the transaction and the FX rate at the closing of the transaction - whether a profit or a loss, are required to be recognised in the Accounting Books of the company at the date when they each arise. Where the transaction is a continuing one, IFRS requires such investment to be initially recognised under Other Comprehensive Income and reclassified to a profit or loss position on the disposal or completion of the transaction or investment.

In summary, assets and liabilities are required to be translated and booked at the FX rate, at the end of the accounting period of each transaction. Income and expenses are required to be translated at the FX rate existing on the dates of each of these events. And lastly, FX rate differences are recognised under Other Comprehensive Income and subsequently reclassified to the Profit and Loss Account on the disposal or completion of the FX related transaction.

Conclusion

In an article by Jenny Bourne Wahl, published in the National Tax Journal, this writer while considering the United States of America Tax Reform Act 1986, was of the opinion that the timing of the recognition of FX gains and losses directly influence the effective tax rate that will apply to foreign assets and liabilities. This writer concluded that legislation which allows FX gains or losses to be taxed on the realisation of the gain or loss, as opposed to when the loss or gain accrues, or comes into existence, is a much stronger tax incentive to promoting transactions in the FX market.

The opinion of the above writer is tandem with IFRS IAS 21 as summarised above for your compliance.

Disclaimer

This is a free educational material. It does not serve as a source of solicitation, advertisement or the offering of legal services or advice of any kind. No Client/Attorney relationship is therefore created. Readers are strongly advised to always seek from qualified Legal Practitioners, competent legal counselling to their specific factual situation.

Intellectual Property Protected!

This material is protected by International Intellectual Property Laws and Regulations. This material can therefore only be reproduced or re-distributed for non-profit educational purposes under the strict condition that our Authorship of this material is explicitly acknowledged, and our above Disclaimer Notice is prominently displayed.

Introduction

Globalisation and Technological Advancements are encouraging more Nigerian Businesses to diversify their spheres of businesses, into other countries; especially West and South African countries.

As commendable as the expansionist agenda of these Nigerian companies may be, there are Nigerian and the foreign country specific tax obligations that should be carefully considered before valuable human and financial resources are expended, or continue to be expended on such ventures.

Basis of Companies Income Tax Applications

The underlining basis for imposing Companies Income Tax on the profits of a Nigerian incorporated or registered company are as follows; Companies Income Tax is imposed on All the world-wide Profits of a Nigerian Company, from All its Sources of Income or Profits, on such Profits that accrue in, are derived from, or are brought into, or are received in Nigeria.

The Companies Income Tax Rate in Nigeria is Thirty Per Cent (30%); and this corporate tax must be paid in the currency in which the Profit or Income is earned.

Mandatory Filing of Tax Returns

All Companies, whether resident or non-resident, whether tax exempt or not tax-exempt, are mandatorily required to file a Self-Assessment Tax Return disclosing all the sources of their income and profits earned, not later than six (6) months after the end of such a Company’s prior financial year end. Stiff Punitive Fines apply if any company is found guilty of any infraction in failing to file a Self-Assessment Tax Return within the timeline provided.

Minimum Tax Provisions

The Companies Income Tax Act (as amended) (“CITA”) also provides that where any Company, in any year of tax assessment, declares a loss or no taxable income from all its business sources, having carried on business for four (4) or more years, the Tax Authority is empowered to impose on such a Company, a Minimum Tax assessed at the rate of 0.25% of the Company’s turnover where such turnover is less than N500,000; plus an additional 0.125% of such a Company’s turnover that is in excess of the initial N500,00.00 (Five Hundred Thousand Naira).

Companies that are exempted from the Minimum Tax provisions include those carrying on agricultural trade or business; companies with at least 25% imported equity capital; and companies that have carried on business for less than four (4) years.

Best Judgment - Arm’s Length/Artificial Transactions & Transfer Pricing Regulations

On the sensible assumption that a Company may not likely disclose all its world-wide income, from all sources, in such a Company’s Self-Assessment Tax Returns; or where the declared profits do not match the minimum industry returns for the subject period; the Tax Authority is empowered by CITA to, using its best judgment, impose a fair and reasonable tax assessment on the Company’s turnover for the period under tax assessment.

There are also now Transfer Pricing Regulations (“TPR”), which compliment the provisions of CITA regarding the taxation of arm’s length, fictitious or artificial transactions. Tax and TPR rules empower the Tax Authority to make necessary tax adjustments on income transactions that are reasonably presumed to be artificial, or fictitious, or not at arm’s length basis; i.e. transactions between associated companies devoid of independence or neutrality; or where the control of one or other entities is exerted by another or other entities.

Tax Reliefs for Nigerian Foreign Businesses

The Companies Income Tax Act (as amended) provides that any dividend, interest, rent or royalty derived by a Nigerian Company from any country outside of Nigeria, which income is brought into or received in Nigeria through formal licensed financial institutions, is exempted from Companies Income Tax in Nigeria.

It is envisaged that before the above mentioned tax exemption can apply, the Nigerian company will have disclosed to the Tax Authority via its mandatory Annual Self-Assessment Tax Returns, its undertaking in a foreign company that is outside of Nigeria.

It is also envisaged that as with foreign investments made in Nigeria, whose Investors are required to import their capital and obtain Capital Importation Certificates before they can in future repatriate their earnings through formal financial institutions, Nigerian Companies may also be required to provide necessary paperwork of the export of their capital from Nigeria to the foreign country before any return on such foreign investment can enjoy tax exemption in Nigeria.

Relief from Double Taxation is another tax relief to consider. Where a Nigerian Company earns dividend or other income from outside of Nigeria from which it cannot claim the above mentioned tax exemption, such dividend or other income where it originates from a Commonwealth country with whom Nigeria has a gazetted Double Taxation Treaty (“DTT”), could enjoy a tax relief at the tax rate provided for in the DTT.

Some of the countries with whom Nigeria currently has DTT with include Belgium, Canada, China, Czech Republic, France, Netherlands, Pakistan, Philippines, Romania, Slovakia, South Africa and the United Kingdom.

Though Article 40(5) of the Economic Community of West African States (“ECOWAS”) Revised Treaty enjoins Member States to avoid cases of Double Taxation between Community Citizens of Member States, and to grant assistance in combating International Tax Evasion through the execution of a Double Taxation and Assistance Convention, there is presently no record of such a Convention ratified by ECOWAS Member States.

Conclusion

Though Nigeria is a Member of many international economic organisations, such as ECOWAS, the African Union, the Commonwealth, etc, Nigeria does not have DTTs with very many of these Member countries. This failure has impeded free trade, as well as promoting double taxation and tax evasion in the process.

Disclaimer

This is a free educational material. It does not serve as a source of solicitation, advertisement or the offering of legal services or advice of any kind. No Client/Attorney relationship is therefore created. Readers are strongly advised to always seek from qualified Legal Practitioners, competent legal counselling to their specific factual situation.

Intellectual Property Protected!

This material is protected by International Intellectual Property Laws and Regulations. This material can therefore only be reproduced or re-distributed for non-profit educational purposes under the strict condition that our Authorship of this material is explicitly acknowledged, and our above Disclaimer Notice is prominently displayed.