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1.                          INTRODUCTION

Nigeria is a Federal Republic; therefore, the country’s legal system is based on the English Legal tradition. The law governing voluntary not for profit organizations in Nigeria, is a byproduct of the English common laws. Statutory law governs the creation of a not for profit companies. Others not profit organization, such as unincorporated associations, charitable, charitable trust, friendly societies, political parties, and trade unions also exist in Nigeria.

Nigerian companies are taxed under the Companies Income tax Act (CITA). The Companies Income Tax Act, exempt from tax the profits of companies engaged in certain public benefits activities, so long as the profits are not derived from trade or business undertaking. Profits of companies established to promote sporting activities are also exempted. Nigerian companies may also make tax deductible donations to certain public benefit organizations that are listed in the Fifth Schedule to the Companies Income Tax Act.

The relevant laws on tax exemption are the Constitution of the Federal Republic of Nigeria, 1990;[1] Companies and Allied Matters Act;[2] Companies Income Tax Act;[3] Criminal Code;[4] and Federal Inland Revenue Service  (Establishment) Act, 2007.[5]

An association of persons, which appoints one or more trustees and pursues registration under Part C of the Companies and Allied Matters Act, is called incorporated trustees. Upon registration, the trustees become a body corporate with a perpetual succession as well as the power to sue and be sued. There are essentially two forms of association with incorporated trustees. The first form occurs where the trustees are appointed by any community of persons bound together by customs, religion, kinship or nationality. The second form is identified by the fact that the trustees are appointed by anybody or association of persons established for any religious, educational, literary, scientific, social, development, cultural, sporting, or charitable purpose.[6] 

Also, a Company Limited by Guarantee is formed for the promotion of commerce, art, science, religion, sports, culture, education, research, charity, or other similar objects. The income and property of the company is applied solely towards the promotion of its objects. No portion of the company’s income or property may be paid or transferred directly or indirectly to the members of the company except as permitted by the Companies Allied Matters Act.[7] 

The activities listed in the Companies Income Tax Act for the purposes of tax exemption and deductibility of donations indicate which types of activities are considered to be of public benefit. These may include; ecclesiastical, charitable, educational, or sports.[8] The Taxies and Levies (Approved List for Collection) Act 1998 No. 21 is the most comprehensive and authoritative legislation on taxes that can be collected by each level of government. 

In Nigeria, certain types of income are exempted from income tax. The exempted income includes the profit of any company engaged in ecclesiastical, charitable or educational activities of a public character in so far as such profits are not derived from trade or business carried on by such company; and the profits of any company formed for the purpose of promoting sporting activities where such profits are wholly expendable for such purposes.[9] 

2.                          STATEMENT OF THE PROBLEM

The Federal Inland Revenue (FIRS) recently issued guidelines stating that all Non-Governmental Organizations (educational institution’s) are expected to register with the nearest Integrated Tax Office (ITO) of FIRS with the following documents: i) a copy of registration certificate issued by the Corporate Affairs Commission (CAC), ii) certified copy of Memorandum or Constitution, Rules and Regulations governing the educational institution, iii) list and profiles of the Trustees/Board members nominated; one of the Trustees/Board member must be serving government official responsible for the activity of the educational institution; iv) copy of the current Tax Clearance Certificate of each of the Trustees.[10]  It is mandatory for every educational institution to file a tax return every year at the Integrated Tax Office where it was registered. An educational institution seeking clarification on its tax exemption status can direct its inquiry to the Integrated Tax Office where it was registered.[11] It should however be noted that the laws of Nigeria do not provide for the deductibility of donations made by individuals to Nigerians for education.

3.                          OBJECTIVES OF THE STUDY

the primary objective of this study is to provide an appraisal of tax status obligations and exceptions of a company limited by guarantee, especially tertiary education institutions. This is done by providing clearification on Tax Status and  Obligations In Nigeria and  analysing the exception of a company limited by guarantee using tertiary institutions as case study.

4.                          RESEARCH METHODOLOGY

The research adopts the doctrinal method of research that is library – oriented research. In employing this methodology, primary research materials were sourced from Statutes, such as the 1999 Constitution of the Federal Republic of Nigeria (as amended),  the company Income Tax Act , law reports and other relevant domestic legislation for the presentation of this work. Secondary research materials including but not limited to textbooks, law journals, and internet works, unpublished but relevant article delivered at seminars, conferences, workshops and lectures were used for the purpose of analysis to arrive at conclusions and opinion information. The doctrinal method is best for this research because most of the materials needed for the work are books base information

5.                          SCOPE OF THE STUDY

The scope of this research work centered on law of taxation. Therefore, this work covered Nigerian tax laws and regulations. Reference has, however, been made to the tax laws of other jurisdictions such as some African and Asian countries, to draw useful lessons and make the Nigerian Tax system globally competitive

6.                          SIGNIFICANCE OF THE STUDY

This work will benefit a cross section of people who have anything to do with tax law taxation in Nigeria as a whole. For example, the State and Local Government will know their powers to make or impose taxing power on tax payer within their domain on items in the approved list for collection. The research will in addition educate the society or tax payers to rise to the challenge and defend themselves when illegality is about to be or is being carried out on them.

The Federal Inland Revenue Service (FIRS) will find this work most useful and helpful because of its objects and functions as stated in sections 2 and 8 of Service Act (Amendment Act 2007). Even the National Assembly (Senate and the House of Representative) and the State Houses of Assembly will find this work particularly important to them. This is because even though some of them are lawyers they might not be vast in tax laws

7.                           LITERATURE REVIEW

In the past, attempts have been made to engineer the reform process though without much progress. But considerable amount of research and study groups on the Nigerian tax reforms have been devoted to these areas. 

Many writers have written on the reforms of tax administration from different perspectives but they seem not to be very emphatic on the need to consider deeply the new structure of the Federal Inland Revenue Service. Some of the works made many references to the former legislation, some of which have been amended. There is need to restructure their work to go in tandem with the amended laws.

Omoigui Okauru, the former Executive Chairman of the Federal Inland Revenue Service (FIRS) in her book, FIRS and Taxation Reforms in Democratic Nigeria[12] not only documents the monumental reforms carried out since 2004, but also discusses the outcome of the current reforms. The book chronicles the historic changes which have been witnessed in the regime of taxation in Nigeria‘s fourth republic particularly since the 2004 reforms. The work records, explains and reveals the complex processes including the challenges faced and the subsisting constraints which, according to her, have led to ―one of the most efficient, most effective, and most productive taxation regime and tax management institution in the developing world.‖[13].

 The book points out that an important indication of the monumental achievements produced by the reforms since 2004 under Omogui-Okauru‘s leadership is that, in the fourth year of the reform alone (that is in 2008) the actual collection of 2.972 trillion naira in taxes was over and above the cumulative collection for the eight year period (19962003) preceding the reforms which amounted to only 2.682 trillion naira[14].

 Notwithstanding the significance of the book in understanding the rationale and process of the reforms, it is written solely from the perspective of an insider, it is therefore necessary to also examine the reforms under the FIRS (Establishment) Act from the perspective of other stakeholders namely tax payers, tax practitioners, State Board of Inland Revenue (SBIR).

 According to Abdulrasaq[15], No tax law, no matter how sophisticated and progressive can be effective unless it is administered with competence and integrity.

According to him, Nigerian‘s income tax law could in spite of their low rates and generous allowances still have yielded much revenue but for the inefficiency and detective assessment and collection machinery. The work however has tax offences and penalties as its major focus. Furthermore it was published over fifteen years ago, subsequent to which major changes have taken place in tax administration in Nigeria. 

According to Adedokun,[16] the legal and institutional framework for tax enforcement and their application to tax practice is a sine qua non for effective tax administration. He also examined several mechanisms employed by the tax administrators in enforcement and recovery of tax in Nigeria, amongst which are distress, litigation, use of tax clearance certificate, monetary penalties and criminal prosecution and search and seize. 

 The work is a worthy contribution to knowledge in its treatment of the tax administrative machinery and enforcement agencies. However, these fail to address the recent important and far reaching reforms that have taken place in tax administration at the federal level as well as the challenges currently facing the Federal Inland Revenue. It is a gap that the research addresses.         

The Nigeria Tax Law by Ayua[17] is one of the oldest detailed works on Nigerian tax law. It examines the structure of the Nigerian tax system from a legal perspective. These include Personal Income Tax and Companies Income Tax. The work is rich in its treatment of the rules for the interpretation of taxing statutes as well as in other aspects; however its limitations lie in the fact that, while it generally discussed tax administration, it did not specifically treat the issue of reforms. In addition, there have been far reaching reforms in Nigerian tax law and tax administration since the publication of the work. Some of the tax laws have been repealed and several others enacted, nevertheless, the work forms a useful foundation for any legal discussion of tax matters in Nigeria. 

Although Ojo,[18] discusses tax from the accounting perspective, his work contains issues of relevance to the law. His work however examines the basic principles of taxation in Nigeria amongst which includes various tax laws e.g. Value Added Tax (VAT), Stamp Duties Act, Petroleum Profit Tax, Personal Income Tax, Capital Gain Tax, taxation of companies, partnership assessment, taxation of non-residents, and administration of tax in Nigeria as well as the management of taxation in Nigeria. 

 Some of the topics in his work made a lot of references and quotations from the existing laws as at that time and these laws have been amended. For example, the former administrative machinery, which was the Federal Board of Inland Revenue (FBIR), has now been replaced with the FIRS and also the composition of each of these machineries has also been changed. The work aids the researcher in appreciating circumstances and short comings in the past system that led to present reforms. 

 According to Philips,21 reforms are deliberate changes aimed at improving structures and systems. Such improvement- generating changes are usually required when existing structures and systems are failing to satisfactorily achieve their objectives.

According to him, these three triggers of reforms were at play in 2002 when the Federal Government of Nigeria inaugurated the Nigerian Tax System Reform Committee which was chaired by him. However, the report of the Study Group contained some other radical shift in policy which necessitated the Federal Government to set out a Working Group on January 12, 200422. In this lies its limitation.

In 2004, a Working Group (the WG)[19] was inaugurated to review the report and recommendations of the Study Group (SG) which was chaired by Dotun Philips. The

Working Group (WG) agreed with the Study Group‘s recommendations for a National Tax Policy and recommended the creation of an autonomous National Customs and Revenue Authority (NCRA) to assimilate all tax administration powers and duties with funding from retained tax revenues. According to the Working Group the NCRA would be responsible for tax policy and administration across the three tiers of government. In their view, this would be more economical and official and would help coordinate tax instruments across the three tiers thus preventing the current abuse of powers that is currently occurring at the state and local government levels. The group recommended that the NCRA should be created by an enabling legislation, which would set it apart from the Civil Service but within the public administration domain as obtains in South Africa. Some of the advantages of a single NCRA according to the group are: multiplicity of taxes would be better minimized; uniformity of tax rates, among others; a single tax audit would be conducted on companies on an annual basis. This would prevent the nuisance of multiple tax audits by the various tiers of government among others.

However, the above are insufficient and do not warrant the setting up of a central body for the administration of revenues collected by the three tiers of government. Conversely Sani, opposed the creation of National Customs and Revenue Agency (NCRA) for the following reasons: over centralization usually leads to inefficiency, corruption and mass unemployment in the country. The Working Group while agreeing with some of the suggestions of the Study Group, however, disagreed with some of the suggestions.

Nigerian Tax Reform in 2003 and Beyond is the report of the Study Group on the Nigerian Tax system.[20] The 286 page report contained in 6 volumes identifies the problems of taxation in Nigeria as including poor and inefficient tax administration, multiple overlapping taxes, particularly at the lower tiers of government, undue tax burden, tax evasion, corruption and misappropriation of tax revenue as well as a lack of primary data of taxpayers. 

 The report also encapsulates a summary of findings of a survey of the attitude of Nigerian taxpayers to taxation in Nigeria. 275 recommendations are preferred in the documents and these include the provision of training and a code of ethics and conduct for administrators; the need for constitutional amendments to expressly limit the taxing powers of local governments; registers of individual and corporate tax payers to be compiled and tax identity numbers and cards to be issued to them. 

 The focus is on the tax payer since it is only then that taxation with a human face can be achieved. This, according to the report can be achieved through simple tax rules and procedures, low tax burden, tax payer convenience, minimum compliance cost, easy information access and friendly tax administration. 

 The relevance of the report of the study group lies in the fact that its mandate specifically covered the reform taxation and tax administration in Nigeria. Several of its recommendations adopted are currently reflected in recent forms of the tax administration in Nigeria. It is this gap in the reforms that the researcher seeks to examine.

8.                          DEFINATION OF TERMS

Tax: A burden which every citizen must bear to sustain his or her government

Tax Rate: This is the amount of tax which is levied per unit of base

Tax Policy: Polices that aims at amending the tax rate so as to suit economic fiscal policy or measures. 

Tax Incidence: This is where the burden of tax falls or who bears the burden of tax

Tax Base: It is the object that and it could be the value of the income

Taxable Capacity: It is the connection with the amount of tax which could be jointly or fairly imposed on the individual

Tax Compliance: the obedience of a tax payer totally under the law, this obedience can be induce, voluntary or compelled. 

Double Taxation: where a particular good produced of one state bear tax like sales tax, and the same goods when sent to other state is still subjected to sales tax in that state, its double, duplicative or multiple taxation .

9.                          CHAPTERS OUTLINE

The research work is divided into five chapters as follows:

Chapter one deals with the General Introduction of the subject matter of this research work, Statement of Problem, Aim and Objectives of the Research, Research Methodology, Justification of Research, Literature Review, Justification and chapters Layout.

Chapter two deals with tax status, obligations in Nigeria.. Chapter three considered tax status, obligation and exception of a company limited by guarantee.  Chapter four discussed the Examination of tax status, and obligation of tertiary institution. Chapter five deals with summary and conclusion accompanied with recommendation.

[1] Constitution of the Federal Republic of Nigeria, 1999 Cap C 23 L F N 2004  Vol. 3 

[2] Companies and Allied Matters Act, Cap C 20 L F N 2004 Vol.3

[3] Companies Income Tax Act, Cap C 21 L F N 2004 Vol. 3

[4] Criminal Code Act, Cap C 38 L F N 2004 Vol. 4

[5] Federal Inland Revenue (Establishment) Act, 2007

[6] Section 673 of t

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