Tax Appeal Tribunal settles DeltaAfrik and Akwa Ibom SBIR

On 22 January 2020, the Tax Appeal Tribunal in South-South zone decided that a tax authority is not allowed to carry out PAYE tax audit on a taxpayer beyond 6 years except in cases of fraud, wilful default or neglect; in the case between DeltaAfrik Engineering Nigeria and Akwa Ibom State Board of Internal Revenue.



DeltaAfrik Engineering Nigeria (DeltaAfrik or Appellant) renders engineering and other related services in the Nigerian oil and gas sector. Akwa Ibom State Board of Internal Revenue (AKSBIR or Respondent) investigated DeltaAfrik on PAYE tax for 9 years, that is, from 2007 to 2015. However, the Respondent failed to substantiate and identify the Company’s employees. In particular, the Respondent did not consider the employment contract and annual PAYE tax returns showing the employee’s annual income and tax paid from 2008 to 2015. AKSBIR, therefore, assessed Delta Afrik to an additional Pay As You Earn (PAYE) tax of NGN14,847,498,665.29 based on the turnover charge-out-rate in the Company’s contract with Mobil Producing Nigeria Unlimited, rather than employees’ income. 

Three (3) issues for determination were: 

  1. Whether the Respondent can issue Best of Judgement on the Appellant and whether the Respondent met the conditions required by law before issuing a Best of Judgement assessment for PAYE tax liability on the Appellant? 
  2. Whether a tax authority can assess a company to PAYE tax rather than its employees? 
  3. Whether there is merit in Respondent arguments? · 

The Respondent also created two (2) issues for determination as follows: 

  1. Whether the Appellant is justified in fact and law to deduct and remit 5% as gross PAYE tax liability of its employees instead of statutory rates in Personal Income Tax Amendment Act 2011 (PITAM or the Act) which resulted in an under-remittance?
  2. If the answer in issue (1) above is negative, whether AKSBIR is entitled to demand the outstanding sum of NGN14,847,498,665.29? 

In the end, the Tax Appeal Tribunal (TAT or Tribunal) held that only one issue called for determination, that is, whether the Respondent can raise the additional liability of NGN14,847,498,665.29? 



  • The TAT decided that the tax investigation covered 9 years. However, state tax authorities are not permitted to carry out a back-duty PAYE audit beyond six years. Section 54(5) of the Act provides that; 

“Notwithstanding the provisions of this section, no assessment to income tax for a year of assessment shall be made by the relevant tax authority on an employee for his emolument or other income if that tax is recoverable by deduction under the provisions of Section 81 of this Act unless within six years after the end of that year”. 


  • Section 81 of PITAM is a specific provision for PAYE. This provision does not, however, prevent the tax authority to audit beyond the six-year limit for other taxes such as withholding tax and value added tax. Furthermore, section 55(2) of PITAM allows the tax authorities to audit beyond 6 years if the taxable person is guilty of fraud, wilful default or neglect. The Board must establish the case of fraud, willful default or neglect, rather than an assumption of guilt.


  • Even though the Appellant paid taxes to AKSBIR, the issue was the amount paid. The tax receipts nullified the operation of Section 55 (2) as the Respondent could not show that the Appellant avoided tax payment on purpose. 
  • The valid years of assessment are from 2010 to 2015 as the years 2007, 2008 and 2009 are statute-barred. 
  • An employee’s salary is used to calculate PAYE tax and not a company’s turnover. In cases of under-remittance, a tax authority can conduct another audit on a taxpayer. However, the tax authority must prove the basis of calculating the additional tax liabilities. 

The TAT, thus, set aside the entire demand notice on DeltaAfrik. 


Concluding remarks

AKSBIR may file an appeal to the Federal High Court within 30 days of receiving the judgment of TAT; otherwise, the judgment will be final and conclusive. A copy of the decision is available here.

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