PRESIDENT ASSENTS TO THE NIGERIA POLICE TRUST FUND (ESTABLISHMENT) ACT 2019 IMPOSING COMPULSORY LEVY ON COMPANIES OPERATING IN NIGERIA
Background
The President of the Federal Republic of Nigeria recently assented to the Nigeria Police Trust Fund (Establishment) Act 2019 (hereinafter the Act). The Act establishes a special intervention fund for training and retraining of personnel of the Nigeria Police force, the provision of state of the art security equipment and other related facilities for the Nigerian Police; and establishes a legal framework for management and control of the fund.
Key Provisions
i. Scope and duration
The Act covers all personnel of the Nigerian Police force and is to operate for a period of 6 years, subject to extension for any further period by an Act of the National Assembly.
ii. Contributions by Companies operating in Nigeria
Section 4(1)(b) of the Act imposes a levy of 0.005% of the net profit of companies ‘operating business’ in Nigeria which is to serve as contributions to the Trust Fund established under the Act.
iii. Commencement
The commencement date of the Act is June 2019. The levy therefore commences in 2019.
iv. Administration
The Act establishes the Nigerian Police Trust Fund Board of Trustees entrusted with the responsibility for management and control, disbursement of money and carrying out other activities of the Fund. The Nigerian Police Trust Fund Board is however not specifcally vested with powers to collect the levy imposed by the Act.
v. Tax Exemptions
Section 23 of the Act exempts the Fund from the payment of income tax on any income accruing to investments made by the Fund and from the provisions of any enactment relating to taxation of companies or trust funds.
Comments
The Act is silent on the collection, enforcement, general administration and management of the levy imposed by the Act. There may be need for regulations to provide for collection and enforcement. The power to make such regulations as to give effect to the provisions of the Act is vested on the Board of Trustees with the prior approval of the President. The Act does not impose any penalty for non-compliance.
Conclusion
The levy imposed by the Act may seem modest, but the cost of compliance by companies may hike up the overall cost and burden on the company. The Fund is also expected to apply to foreign companies operating in Nigeria given the use of the term operating business in Nigeria.
Going forward we expect that the Board of Trustees established by the Act may begin to appoint independent consultants for the purpose of collection or verification of the levy payable by companies. It is also possible that the Federal Inland Revenue Service (FIRS) may take up the responsibility of collection of this levy but its cost of administration and likely issues with remittance to the Board of Trustees may negatively affect the objective of the Fund. In the meantime, we advise that companies operating in Nigeria make provisions for this levy in their financial projections from 2019 onwards.
For further actions and guidelines on the implementation of this Act and how it may affect your business, please contact our team on any of the following numbers 08129929303, 08129929305, 08129929306, 08129929307
The Act does not specify whether the levies imposed by the Fund on companies will be tax deductible.
The Act also fails to define net profits for the purpose of calculation of the levy imposed by the Act.