FIRS issues circular for claiming tax treaty benefits in Nigeria

Nigeria has a tax treaty or double taxation agreement (DTA) with 16 countries. A tax treaty is a bilateral agreement between two countries that helps to settle issues on double taxation. Four (4) legislation on income tax already contains rules on double taxation relief. They are Sections 45 and 46 of the Companies Income Tax Act, Cap. C21 LFN 2004 (as amended), Sections 38 and 39 of the Personal Income Tax Act, Cap. P8 LFN 2004 (as amended), Sections 61 and 62 of the Petroleum Profits Tax Act, Cap. P13 LFN 2004, and Section 41 of the Capital Gains Tax Act, Cap. C1 LFN 2004. 

The Federal Inland Revenue Service (FIRS) has now issued a circular on the claim of tax treaties benefits in Nigeria. The Circular covers tax treaty rates, conditions for enjoying treaty benefits and dispute resolution rules, and others. Also, the Circular explains how to use and calculate different tax treaty benefits in Nigeria. 

Key points for claiming tax treaty benefits in Nigeria

Here are five (5) key points in the Circular:

1. Eligible persons

To claim DTT benefits in Nigeria, a person must be a resident of Nigeria or the treaty country or Nigeria and the treaty partner. 


2. Conditions for accessing DTT benefits

A taxpayer must meet the five (5) conditions below to enjoy the benefits under a treaty. The

  • taxpayer must be liable to tax in the treaty country of which (s)he is a resident,
  • particular income is liable to tax in Nigeria,
  • actual tax relates to taxes on income and capital gains,
  • benefit is covered under the treaty,
  • taxpayer claims the benefit within the time stipulated by the treaty or domestic laws. That is, not later than 2 years from the year of assessment in which the foreign tax was paid.

Nevertheless, a qualified person may not be granted where the residency was mainly to access the DTT benefits or to take advantage of the treaty.

3. Available reliefs

Five (5) reliefs under Nigeria’s DTAs with its treaty partners are;

i.    Relief from double taxation (Tax credit): 

Here, a Nigerian resident can deduct the foreign tax paid from the tax payable in Nigeria. The tax rate on foreign income is the lower of the local or foreign tax rate. Also, the period to claim credit is not later than two years after the year of assessment in which the foreign tax was paid. For example, ABC Global Limited paid foreign tax in the 2019 year of assessment (YOA). ABC Global Limited can claim the amount paid, at the latest, in the 2021 YOA.


ii.    Treaty withholding tax (WHT) rates for passive income or fees for technical service: 

Dividends, interest, and royalties paid to a non-resident in a treaty country or paid by a non-resident in a treaty country to a Nigerian resident will attract a lower withholding tax rate. Also, the beneficial owner of the income must be a resident of the other treaty partner, even if the income was not paid directly to him. A lower WHT rate does not apply to rental income from immovable property, such as land, or royalties from mineral deposits and other natural resources.


iii.    Treaty tax rates to foreign airlines or shipping companies: 

Two (2) cases where companies in this category may enjoy the DTT benefits are:

  • Case of reciprocity in international traffic between Nigeria and a treaty country of a foreign airline or shipping company: The transport business will be taxed in their jurisdiction in each YOA.
  • Case of no reciprocity: The tax rate in the relevant DTA will apply. Usually, the rate band is between 1% and 1.5%. DTAs with the United Kingdom, Italy, and China are however exempt from this rule.

iv.    Access to Mutual Agreement Procedure (MAP) for dispute resolution: 

The taxpayer may use MAP to settle the dispute(s) in interpreting or applying a DTA. More details on MAP are available here.


v.    Fairness in tax matters:  

Taxpayers in Nigeria or its treaty countries should have fairness in tax obligations. Where a taxpayer faces tax discrimination, he may apply to his Competent Authority (CA) (or the CA of the treaty partner, where applicable) for redress through the MAP.

4.    Procedure for claiming treaty benefits

To claim treaty benefits, a taxpayer will follow three (3) steps;

  • Complete a certificate of residence for Nigerian residents or non-residents. A copy of the two types of certificates of residence is available on the FIRS website.
  • Submit a written application to the relevant tax authority.
  • Submit a claim for the tax credit.


5.    Effective date

The Information Circular will apply to any agreement that comes into effect after 3 June 2021.


The circular will assist taxpayers to claim DTT reliefs in the local tax laws as well as the different DTA between Nigeria and its treaty partners.


Updated: 9 July 2021