• ayishatamoo



Under Double Taxation, what usually transpires is that the income of a taxpayer is taxed several times under different taxing statutes such that a single tax base will end up being subjected to more than one tax. This, broadly speaking, is what double taxation is all about. It happens when a party’s tax base (income, capital, etc.) is taxed more than once, usually by different tax authorities.


There are two main types of double taxation, i.e.

1.Economic double taxation and;

2.Juridical double taxation.

Economic double taxation occurs where two different tax payers suffer tax in respect of the same income. For instance, under the classical system of taxpayers, the company and the shareholder are regarded as separate taxpayers, with each paying its tax as appropriate. The company pays tax on the profits and the shareholder also pays tax on the distribution of the same profit.

International juridical double taxation occurs where two or more countries impose similar tax on the same taxpayer in respect of the same tax base. This can happen, for instance, in a situation of dual residence, where two countries exercise their right to tax the same taxpayer on worldwide basis in each state in accordance with the domestic laws of the respective states. This would occur because the taxpayer is regarded as resident in each of the tax jurisdictions, based on their domestic laws. For instance, where a company registered in Nigeria is taxed on its worldwide profits under section 13(1) of CITA, it may also be considered as being effectively managed in another country, which goes on to tax the company on the same income, thus creating judicial double taxation.

The juridical double taxation, as noted above, is a case of international double taxation, and it occurs where a taxpayer falls into the tax net of two or more legal jurisdictions in the exercise of their taxing powers. With global travel and supply of goods and services on the rise, businesses and individuals cross borders for work and trade daily.

Therefore, it is important to have collaborative tax rules that will address the issues of double taxation, so that investors and businesses will not be apprehensive about doing business in different countries.

To this end, many countries have introduced laws to guard against the effects of double taxation. For example, the Nigerian government has entered into double taxation relief arrangements with several governments, which have been codified in domestic instruments, such as the following subsidiary instruments pursuant to the provisions of section 45 of the CITA, which empowers the Minister of finance to, by Order, enter into an arrangement with any country to avoid double taxation.

1.Double Taxation Relief (between the Federal Republic of Nigeria and the Government of the Kingdom of Belgium) Order S.I. 15 1997

2.Double taxation Relief (between the Federal Republic of Nigeria and the Government of French Republic) Order S.I. 16 1997

3.Double taxation Relief (between the Federal Republic of Nigeria and the Government of Canada) Order S.I. 17 1997

4.Double taxation Relief (between the Federal Republic of Nigeria and the Government Romania) Order S.I. 18 1997

5.Double taxation Relief (between the Federal Republic of Nigeria and the Government of the Kingdom of Netherlands) Order S.I. 19 1997


It is the practice in Nigeria for income tax to be imposed both on worldwide income derived by residents of Nigeria and on income derived by non-residents generated within the country. The effect of such a system is that income derived by a resident of Nigeria from a source in another country is subject to tax in both states and vice versa. This position clearly discourages foreign investments from trading in Nigeria.

The phenomenon of double taxation occurs frequently representing a difficult position for the foreign trade activity, hindering investments abroad. Double taxation is an obstacle to the development of economic relations between states, reducing the revenue of the international operations and their interest in making investment abroad.

Nevertheless, the above mentioned arrangements serve as a relief to double taxation in Nigeria. And in addition to the above mentioned countries, the Act also provides relief from double taxation when tax has been paid on the same tax base in a commonwealth country. (Section 44 CITA)

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