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Introduction

Land continues to be a very significant aspect of human existence and wealth creation. In recognition of this reality, the land laws in most countries make the ownership of land and the right to alienate such ownership to other persons, an inalienable constitutional right.

Due to insufficient enlightenment on the lawful methods to validly obtain and retain legal title to land, proof of ownership to land continues to be very contentious and litigious.

To mitigate against some of the risks associated with land acquisition and ownership, let us consider some of the most common methods of owning and retaining ownership to land, pre and post the enactment of twenty-first century land legislations.

Historical Methods of Land Ownership

FIRST SETTLERS – From time immemorial, the first legally recognised method of land ownership was with the first settlers on any land, who located, de-forested and cultivated the land over a very long period of time.

WAR AND CONQUEST – Tribal wars and victors from such wars usually took as spoils of such wars, the lands of the losing tribe.

CUSTOMARY GRANTS OF TITLE – Before the passing into Law of land legislations, land allocation and transfer were mostly done by the Community Head of the area where the land is situated.

INHERITANCE – Title to land has also evolved from one generation to the next generation by way of hereditary succession.

GIFTS – Title to some land have passed to other people by virtue of the legitimate owner of the land making a gift of the land to another person. It is however recommended that in this present day, where a gift of land is made, it should be embodied in a Deed of Gift to which the consent of the appropriate statutory authority should be obtained.

SALE OF LAND – Advancements in civilisation, industrialisation and the economic migration of people have led to the sale of land being the most common method of acquiring title to land. Where a sale of land is under customary law, such sale will only be valid where money is paid and the land is delivered to the buyer in the presence of at least two (2) witnesses. Where a sale of land is not under customary law, a formal written agreement is required to validate the sale.

Land Use Act and Land Ownership

The enactment of the Land Use Act in 1978 has brought into force the jettisoning of the old methods of acquiring land, as enumerated above; with all land not previously owned before 1978, now vested in the Governor of the State – for land in urban areas – or the Chairman of the Local Government Area - for land in rural areas; both of whom hold all such land in trust, for the common benefit of the people of such a State or Local Government Area where the land is situated.

CERTIFICATE OF OCCUPANCY. In furtherance of the authority conferred on the Governor by the Land Use Act, a Governor of a State is the only authority permitted to issue a Certificate of Occupancy to Applicants that fulfil the conditions precedent for the issuance of a Certificate of Occupancy; upon the payment of the prescribed fees. For land in rural areas, it is the Local Government Chairman that issues the Customary Rights of Occupancy.

Like any other contract, the terms and conditions of a Certificate of Occupancy, which includes the payment of the annual rent, must be strictly adhered to as any breach or default will lead to the Certificate of Occupancy or the Customary Right of Occupancy being revoked.

TRANSFER OF TITLE – Assignment, Mortgage, long Lease or Sublease. It is unlawful for any Certificate of Occupancy or any Customary Right of Occupancy to be transferred to another party by assignment, mortgage, transfer of possession, sublease or otherwise without the consent of the Governor – or Local Government Chairman as may apply - being first obtained. For land in urban areas, it is the consent of the Governor of that State that is required; and for land in the rural areas, it is the consent of the Chairman of the Local Government that is required.

Where the prior consent of the Governor or Local Government Chairman is not obtained to any alienation of any interest in land, such alienation shall be held to be null and void.

Conclusion

As owing any form of interest in any real estate is a very important business decision that an individual or corporate entity will make during his or her or its lifetime, greater care and circumspect must be exercised in acquiring and retaining valid legal title to this continually appreciating asset.

DISCLAIMER NOTICE

This is a free educational material which does not create a Client/Attorney relationship. Readers are advised to always seek professional legal advice to their specific situations from qualified Legal Practitioners. Questions, comments, observations, suggestions, new ideas, contributions, etc. are always welcomed. You can also visit our website www.oseroghoassociates.com for more legal materials.

INTELLECTUAL PROPERTY PROTECTED.

This material is protected by International Intellectual Property Laws and Regulations. This material can only be re-distributed for non-profit educational purposes only on the strict condition that our authorship is acknowledged, and the Disclaimer Notice is prominently displayed.

 

Introduction

 

By Law, every registered corporation must at least on an annual basis, file with the Companies Registry, its Audited Accounts or Audited Financial Statements which is a periodic summary of the transactions of the company for the subject period.

 

The Audited Financial Statements usually discloses the company’s assets, its liabilities, balance sheet, profit and loss accounts which in some jurisdictions is also known as the Income Statements.

 

Traditionally, the Accounting Reporting Period of a company is 1st January to 31st December of each calendar year. A company can however elect or choose to change its accounting date, subject to compliances with the provisions of the Companies and Allied Matters Act (“CAMA”), and the Companies Income Tax Act (“CITA”).

 

Possible Reasons for Change of Accounting Date

 

Some of the reasons that may warrant a company to change its accounting reporting date include:-

 

  1. The need to synchronise the accounting reporting dates of a company with the accounting reporting dates of other companies within a group of companies.

 

  1. The convenience of having a singular stock and audit process at the same period of the year for companies within the same group, with common ownership and control.
  2. Where a merger or acquisition occurs, the accounting dates of the affected companies will need to be harmonised into a single accounting reporting date.

 

Companies Registry - Notice of Change of Accounting Date

 

CAMA gives to the Directors of a company the discretion to determine on what date, and for what period in each calendar year, the company’s Audited Financial Statements will be published. Once the date for the publishing of the Financial Statements is determined, a formal communication of such notification must be transmitted to the Corporate Affairs Commission (“CAC”) within fourteen (14) days.

 

Where the accounting period and the publication date of a company’s Audited Financial Statement is changed by a Shareholders’ special resolution, notice of such change must also be communicated to CAC.

 

However, the period between a former accounting date and a new one must not exceed eighteen (18) months.

 

For a holding company, except for good reason(s), the financial reporting dates for the holding company and its subsidiaries must be the same date.

 

Tax Implication of Change of Accounting Dates.

 

To prevent the deliberate failure to pay taxes, or to fail to pay a properly assessed tax, or to delay in paying its taxes; which is commonly known as tax evasion; and thereby incur punitive penalties for non-compliance, it is highly recommended that a company that changes its accounting reporting dates must ensure that it files it’s tax returns covering each and every day, from the date of the last tax return to the new accounting reporting date.

 

By the provisions of the Companies Income Tax Act (“CITA”), any company that changes its accounting reporting date from the traditional 1st January - 31st December of each year, to another reporting period, must communicate the change to the Tax Authority, which is the Federal Inland Revenue Service (“FIRS”).

 

The Tax Authority is in turn required to, on the receipt of the notice of change of accounting date, compute such a company’s taxes from the date of the last filed tax return to the last date before the new accounting reporting date commences.

 

Penalty for Failure to File Tax Returns After Date Change

 

Where however, a company that changes its accounting reporting date fails to file its tax returns with the Audited Accounts or Financial Statements attached, up to the last date before the new accounting date starts, the tax authority is required to compute such a company’s taxes for the relevant year and for the next two (2) years following, by utilising the Tax Authority’s Best Of Judgment Assessment in arriving at the taxes payable by such a company.

 

Taxation and Best of Judgement

 

A Best of Judgement Tax Assessment arises where a tax payer, in response to a formal tax demand, fails to provide to the Tax Authority sufficient and convincing income records; or does not pay any tax for the tax assessment period in question.

 

Our Courts of Law do not however allow a Best of Judgement Tax Assessment that is manifestly unreasonable, irrespective of whether the tax payer challenges the Best of Judgement tax assessment or not.

 

Mindful of the judicial authorities on this point, the Federal Inland Revenue Service has issued tax circulars which naturally emphasises that a Best of Judgement tax assessment for an on-going business concern will be based on the preceding year’s tax assessment, with the next two (2) years following the year when the accounting date change occurred.

 

Naturally, the greater of the aggregate tax assessment for the last accounting period and the tax assessment for the subsequent two (2) years will be chosen by the Tax Authority as the Best of Judgment tax assessment for the tax payer to liquidate this tax debt.

 

DISCLAIMER NOTICE

 

This is a free educational material which does not create a Client/Attorney relationship. Readers are advised to always seek professional legal advice to their specific situations from qualified Legal Practitioners. Questions, comments, observations, suggestions, new ideas, contributions, etc. are always welcomed. You can also visit our website www.oseroghoassociates.com for more legal materials.

 

INTELLECTUAL PROPERTY PROTECTED.

 

This material is protected by International Intellectual Property Laws and Regulations. This material can only be re-distributed for non-profit educational purposes only on the strict condition that our authorship is acknowledged, and the Disclaimer Notice is prominently displayed.

 

Legal Alert – December 2014 – Tax and Pensions – Statute of Limitation

 

Introduction.

 

Taxation is a statutory contract between a government and its citizens, for the citizen’s proportionate financial contributions with which public services that will enhance development and general well-being are provided.

 

Like all contracts, the statute of limitation rule also applies to tax and pension matters.

 

A Statute of Limitation is the time limit or period within which a claim can be asserted or insisted upon. Some of the reasons for the statute of limitation rule include the need for claims to be timely and diligently pursued or presented while the evidence and the witnesses are available, and their memory of the facts and events are fresh.

 

A further reason for the statute of limitation rule is that it brings predictability and finality to claims within a reasonable period of time.

 

Statute of Limitation in Tax Matters.

 

Under the Companies Income Tax Act and the Personal Income Tax Act,the limitation period for asserting tax claims is six (6) years from the date when the final tax assessment became due for payment.

 

The statute of limitation rule will not however apply where the tax payer is guilty of fraud, wilful default or neglect in the settlement of a tax assessment. These very wide exemptions to the limitation period rule continues to be used by the tax authorities to deprive tax payers of claiming relinquishment of “stale” tax assessments under this six (6) years rule.

                                                     

What is Fraud, Wilful Default or Neglect?

 

Fraud is the deliberate misrepresentation or perversion or concealment of the truth with the intention that another person will rely on such misrepresentation, perversion or concealment, to his, or her, or its detriment or prejudice.

                                                                                             

Wilful Default on the other hand is the voluntary and intentional omission to carry out a duty.

 

Neglect is the omission to pay proper attention.

 

Pre–Action Notice and Statute of Limitation

 

By Section 12 (2) of the Education Tax Act, legal actions against the Education Trust Fund, its Board of Trustees and other senior officers of the Education Trust Fund must be commenced within three (3) months after the infringing act, neglect or default has occurred. Where the damage or injury is of a continuing nature, legal action must be commenced within six (6) months after the continuance complained about ceased.

 

To commence a legal action against the Education Trust Fund, a one (1) month pre-action notice must be served on this Fund. And the pre-action notice must disclose the name and place of abode of the complainant, the particulars of the injury, the neglect or default complained about, and the reliefs intended to be claimed as a result.

 

Under the Pension Reform Act 2014, a pre-action notice of thirty (30) days is also required to be served on the National Pension Commission before any law suit can be validly commenced.

 

Conclusion

 

A judicial pronouncement on what amounts to wilful default or neglect in asserting a tax claim that is unpaid six (6) years after the final assessment was issued will be very helpful in reconciling the current practice where the interpretation of what amounts to wilful default or neglect by the tax authorities administratively holds unchallengeably.

 

DISCLAIMER NOTICE

 

This is a free educational material which does not create a Client/Attorney relationship. Readers are advised to always seek professional legal advice to their specific situations from qualified Legal Practitioners. Questions, comments, observations, suggestions, new ideas, contributions, etc. are always welcomed. You can also visit our website www.oseroghoassociates.com for more legal materials.

 

INTELLECTUAL PROPERTY PROTECTED.

 

This material is protected by International Intellectual Property Laws and Regulations. This material can only be re-distributed for non-profit educational purposes only on the strict condition that our authorship is acknowledged, and the Disclaimer Notice is prominently displayed.

SEPTEMBER 2014 - TAX INCENTIVES AND EXPENDITURE ALLOWANCES.

INTRODUCTION

To encourage further and continuing investments, various Tax Incentives and Tax Capital or Expenditure Allowances are embedded in the Statute Books waiting to be taken advantage of by businesses. Some of these investment incentives and expenditure allowances are succinctly highlighted in the following paragraphs.

Note however that only expenditures that are wholly, exclusively, necessarily and reasonably incurred in the trade or business of the tax payer can be claimed as a capital expenditure.

Also note that the depreciation of the assets of a company is not allowed under the Companies Incomes Tax Act in Nigeria. Instead, Capital Allowances are allowed.

PIONEER STATUS

By the Industrial Development (Income Tax Relief) Act, the Nigerian Investment Promotion Commission Act and the Pioneer Status Incentive Regulations 2014, companies engaged in gazetted pioneer industries and products are entitled to apply for Pioneer Status, and when granted, enjoy tax exemption/relief/holidays, for an initial term of three (3) years, starting from the date that the pioneer company commences business. The tax holiday period may be extended for a period of one (1) year, and a further one (1) year term, subject to the level of development and the relative importance at the time of the industry to the development of the country.

To qualify to apply for Pioneer Status however, the Applicant Company must among other things be registered as a corporate entity in Nigeria; and must have incurred qualifying capital expenditure of not less than Ten Million Naira (N10Million) in the pioneer industry concerned. Also, the application for the Pioneer Status must be submitted within one (1) year of the Applicant Company’s commencement of commercial production.

 

SOLID MINERALS

A new company engaged in the mining of solid minerals is entitled to tax exemption for the first three (3) years of its operations.

AGRICULTURAL AND FOREIGN LOANS

Interest payable on loans granted to agricultural trade or businesses, local plant and machinery fabrication, and working capital for any cottage industry, is/are also exempted from tax provided that the moratorium of the loan is not less than eighteen (18) months, and the rate of interest on the loan is not more than the base lending rate at the time the loan was granted.

Also, losses arising from an agriculturally based trade or business are allowed to be carried forward indefinitely.

For foreign loans, interest payable on foreign loans is exempted from tax in the manner prescribed in the Table in the Third Schedule of the Companies Income Tax Act (“CITA”).

HOTELS TOURIST INCOME

Twenty-five per cent (25%) of the income derived by a Hotel, in internationally convertible currencies, from tourists using the services of such a Hotel, are exempted from any form of tax, provided that such income is paid into a domiciliary account Reserve Fund, to be utilised within five (5) years in the building expansion of new Hotels, conference centres and other new facilities which promote tourism development.

RURAL INVESTMENT ALLOWANCE

Where a company provides for the purposes of its trade or business infrastructural facilities like electricity, water or tarred roads, which must be at least twenty (20) kilometres from such facilities provided by the Government, such a company will be entitled to claim both the Initial Allowance on such expenditure, and a further Rural Investment Allowance whose rate is graduated based on the scale of the facilities provided.

Where no public facilities exist, a hundred percent (100%) Rural Investment Allowance will be allowed by the tax authorities on such rural infrastructural expenditure(s).

A Rural Investment Allowance cannot however be carried forward.

RECONSTRUCTION INVESTMENT ALLOWANCE

To compensate businesses that incur expenditures on plant and machinery, CITA allows to such companies a ten per cent (10%) Reconstruction Allowance of the actual expenditure incurred on such plant and equipment. This is in addition to the initial allowance granted on such plant and equipment.

A Reconstruction and a Rural Investment Allowance cannot however be claimed on the same expenditure.

RESEARCH AND DEVELOPMENT (R & D) ALLOWANCE.

Companies and other organisations engaged in Research and Development activities (“R&D”) for commercial purposes, are entitled to claim a twenty per cent (20%) investment tax credit on their R&D qualifying expenditures.

Other companies who undertake R&D activities to promote their trade or business are also entitled to claim the expenses incurred on such R&D provided that the R&D expenditures do not exceed ten per cent (10%) of the company’s total profits in the financial year that the expenditure was incurred.

DEPRECIATION AND CAPITAL ALLOWANCES.

As it does not uphold of transparency and equity, the Companies Income Tax Act (“CITA”) disallows a company depreciating its assets. In place of the depreciation of a company’s assets, CITA makes provision for a transparent capital allowances regime which is encapsulated in CITA’s Second Schedule.

It is however only the qualifying expenditure expended on the assets of a company, which assets are wholly, exclusively, necessarily and reasonably utilised in the company’s trade or business, that are entitled to submit such claims for any kind of tax allowances.

INITIAL AND ANNUAL ALLOWANCES.

CITA allows a company to claim in its first year of use, an Initial Allowance on a capital expenditure expended on a business asset. The rates allowed for each asset group as an Initial Allowance is set out in Table 1 of Schedule 2 of the CITA.

For the following years that the asset is in use, the owner of the asset can claim an Annual Allowance which is the remainder of the Initial Allowance permitted under Table II of the Second Schedule of CITA.

Where a company purchases new plants and machineries in replacement of its old plants and machineries, such a company is allowed a once and for all ninety-five per cent (95%) capital allowance in the first year of the use of the asset. The remainder five per cent (5%) of the value of the asset is required to be retained in the financial books of the company until the asset is disposed off.

BALANCING ALLOWANCES AND BALANCING CHARGES

Balancing Allowances and Balancing Charges are other tax reliefs that a company can claim when it disposes of an asset.

A Balancing Allowance is the difference between the residual value of the asset and its sale value. This difference in an allowable tax deduction which can be written against the profit and loss accounts of the affected company.

Where the value of the asset at the point of its disposal is higher than the residual value of the asset, a Balancing Charge arises with the excess value written back to the profits of the company and taxed accordingly.

Note however that the maximum claim for capital and investment tax allowances that will be granted by the tax authorities is ninety-five per cent (95%) of the total cost of the qualifying asset.

EXPORT INCENTIVES

To promote the indigenous manufacture of products for export, various Export Incentives exist; like the Manufacture-In-Bond Guarantee; Duty Drawback Schemes; etc. Also in existence are Export Processing Zones for oil, gas and none oil and gas enterprises.

Products manufactured in Export Free of Export Processing Zones can only enjoy tax exemption if they are exported to another country, other than Nigeria.

CONCLUSION

In conclusion, fictitious, artificial or none bona-fide expenditures will not qualify to claim any tax allowance or relief.

DISCLAIMER NOTICE

This is a free educational material which does not create a Client/Attorney relationship. Readers are advised to always seek professional legal advice to their specific situations from qualified Legal Practitioners. Questions, comments, criticisms, suggestions, new ideas, contributions, etc. are always welcomed. You can also visit our website www.oseroghoassociates.com for more legal materials.

INTELLECTUAL PROPERTY PROTECTED.

This material is protected by International Intellectual Property Laws and Regulations. This material can only be re-distributed for non-profit educational purposes only on the strict condition that our authorship is acknowledged, and the Disclaimer Notice is prominently displayed.

 

Legal Alert – November 2014 – Joint Ownership of Property

Introduction.

The joint ownership of a property or properties continues to be a more common means of wealth creation. Joint ownership in some other instances serve as a succession plan that reduces estate taxes, Attorney Fees, etc.

As it is common with humans, the joint ownership of a property, either by contract, gift or by inheritance can lead to disputes and litigation between the surviving owner or owners and the deceased owner’s heirs, especially if the joint ownership instrument is not carefully drafted.

Joint Tenancy.

Joint Tenancy is the right to the ownership of a property, by more than one person, such that on the death of any of the joint owners, the deceased owner’s portion of the property passes to the surviving owner or owners of the property. The deceased owner’s estate and heirs under a joint ownership structure will receive absolutely nothing.

Also, subject to whether words of severance or separation are used in the title instrument under which the property is held, an owner to a jointly held property cannot alienate his or her interest in such a property without the express consent of the other co-owner(s) to the property.

Joint Owners and Tenants-in-Common.

The opposite to the above described joint tenancy scenario is the principle known as Tenants-in-Common which arises where the property’s instrument of title have words of severance or separation or distribution of the subject jointly held property. Where words of severance or separation are used, the words of severance or separation entitles the heirs or estate of a deceased owner to assume ownership of the deceased share of the property, with the surviving owner or owners of the property.

Conclusion.

Ensuring that the title document under which a property that is jointly owned is carefully drafted to achieve the estate plan of the owners of the property is strongly recommended. Where the joint owner or owners do not want their heirs to inherit any portion of the property on their demise, then no words of severance or separation should be used when drafting the instrument of ownership. Where the intention is for the heirs to inherit, then words of severance, separation or distribution should be used when drafting the instrument of ownership.

DISCLAIMER NOTICE

This is a free educational material which does not create a Client/Attorney relationship. Readers are advised to always seek professional legal advice to their specific situations from qualified Legal Practitioners. Questions, comments, observations, suggestions, new ideas, contributions, etc. are always welcomed. You can also visit our website www.oseroghoassociates.com for more legal materials.

INTELLECTUAL PROPERTY PROTECTED.

This material is protected by International Intellectual Property Laws and Regulations. This material can only be re-distributed for non-profit educational purposes only on the strict condition that our authorship is acknowledged, and the Disclaimer Notice is prominently displayed.