There has been significant debate in Nigeria in the recent past regarding the taxability of gratuity payments to retired employees. The confusion was created by the ambiguous provisions of different legislation where:

  • Section 3 of the PIT Act does not list gratuities as taxable income – thus the payment of a gratuity should not be taxable; BUT
  • Section 18(b) of the Third Schedule to the PIT Act states that only the amount in excess N 100,000 is subject to tax.

Finally, case law has provided clarification. In the case of Nigerian Breweries PLC vs Abia State Board of Internal Revenue & Ors., the Tribunal held that Section 18 (b) cannot override Section 3 of the Act as a Schedule cannot override a provision contained in a body of legislation.

The implication of the case is that gratuities should not be taxed by an employer when a gratuity is paid to a retiring employee.


The recent Tax Appeal Tribunal furnished some valuable insights into the taxability of voluntary pension contributions (“VPC”) when considering the case of Nexen Petroleum Nigeria Limited. These include:

  1. The Tribunal confirmed that in terms of Section 10(1) of the Pension Reform Act 2004, VPC’s are tax exempt. Further, Section 4(3) of the Act recognizes VPC’s as contributions and does not limit the exemption to the 18% minimum contribution; and
  2. The legislation is clear that if VPC’s are withdrawn before 5 years have elapsed, they will be taxable. However, the Tribunal held that the employer was perfectly correct in not deducting tax before remitting the contributions to the Custodian and that they had no responsibility to ensure that the VPC were not withdrawn within the prescribed 5-year period.


 The Public Notice issued by the Lagos State Internal Revenue Service on 4 June 2019 stated the intention of the body to incorporate the existing Taxpayers Identification Digit (“PID”) with the Tax Identification Number (“TIN”) with the Joint Tax Board. The Revenue Service aims to achieve this by using the Bank Verification Number (“BVN”) of taxpayers.

Several objections have been raised regarding whether the Revenue Service has the power and/or right to request this information in addition to concerns relating to privacy. However, Section 48(4) of the Personal Income Tax Act grants the Revenue Service this power.

Given this, one can expect companies to be instructed to ensure that their employees provide their BVN’s.