Introduction
On 27 February 2019, the Court of Appeal delivered a judgment in which it held that African Reinsurance Corporation (“Africa Re”) is not liable to make industrial training fund (“ITF”) contributions by reason of its exemption from payment of all taxes and levies in Nigeria. This decision, in effect, reverses the earlier judgment of the Federal High Court (“FHC”) wherein Africa Re was adjudged to be liable to make ITF contributions.
Facts of the Dispute
Africa Re is a reinsurance corporation owned by the member-states of the African Union and the African Development Bank. Africa Re was created by an Establishment Agreement that requires its shareholders to accord it immunities, exemptions and privileges including exemptions on tax, rates and levies. Also relevant is a Headquarters Agreement that provides the framework for the siting of Africa Re’s headquarters in Nigeria, which Headquarters Agreement included provisions that exempt Africa Re from all taxes and levies in force in Nigeria.
Following Africa Re’s refusal to pay ITF contributions as demand by the ITF, the ITF commenced an action at the FHC for a judicial directive on Africa Re to pay. The ITF was successful, as in the opinion of the FHC, the Headquarters Agreement did not specifically exempt Africa Re from paying ITF contributions.
Court of Appeal Decision
Aggrieved with the decision of the FHC, Africa Re appealed to the Court of Appeal. In its decision, the Court of Appeal held that Africa Re is exempt from the payment of ITF contributions on the basis of the Establishment Agreement and the Headquarters Agreement. It is the Court of Appeal’s position that the mere fact that a particular tax or levy is not mentioned in the Headquarters Agreement should not disentitle Africa Re from exemption from that tax or levy. However, this court noted that Africa Re’s exemption does not extend to payments for public utility services rendered by the government.
Implication of the Decision
This decision has far-reaching consequences on several levels. Firstly, the label of a payment to the government is irrelevant in determining whether the payment is a tax or not. This is in line with settled law that an imposition is a “tax” not necessarily because it is called a “tax” but because it has the characteristics of a “tax”.
Secondly, this decision is also relevant to the attempts by the Federal Inland Revenue Service (“FIRS”) to collect companies income tax (“CIT”) and VAT from international agencies with an exemption status similar to Africa Re. We observe that recently, FIRS has, further to its powers under the Companies Income Tax Act and the Federal Inland Revenue Service (Establishment) Act, been appointing banks as collecting agents of organizations with the mandate of applying funds belonging to these organizations in the custody of the banks to settling the alleged CIT and VAT liability of these organizations. We note that this decision provides a basis by which organizations with a similar exemption regime to Africa Re can resist these FIRS appointments.
Thirdly, Africa Re’s exemption does not extend to government payments that are for services rendered. Hence, payments for government services (water supply, refuse collection, etc.) are not taxes and levies that Africa Re is exempt from under the Headquarters Agreement. Conversely, payments to the government which are not connected to any services would qualify as a tax and fall within the exemption regime. Consequently, tenement rate and other land charges, LASIMRA levy, LASAA fees, vehicular payments such as vehicle license, roadworthiness certificate fees, etc. are covered by the exemption provision and therefore not payable by Africa Re.
Click here for a copy of the Court of Appeal decision.
