Section 44 of the Cap C21 Corporate Income Tax Act 2004 (as amended) (CITA) provides for Commonwealth Tax Relief (CWTR) as a means of mitigating double taxation in Nigeria. It provides that companies whose profits have been subject to Commonwealth tax are entitled to exemption from tax paid or payable on the same profit, in whole or in part. Double taxation is often an unintended consequence of tax legislation. It is generally considered a negative element of a tax system, and tax authorities try to avoid it as much as possible. Income tax laws often contain different provisions on the tax treatment of income. The objective is to enable taxpayers to understand the tax base for income tax purposes. For example, some income is considered taxable, while others are explicitly exempt from tax. Similarly, tax laws contain provisions to combat tax evasion and provisions on exemption from double taxation. Taxpayers are generally interested in taking advantage of known reliefs and exemptions in the management of their tax affairs. Double taxation often occurs because companies are considered separate legal entities from their shareholders. As a result, businesses pay taxes on their annual income, just like individuals. When companies distribute dividends to shareholders, these dividend payments entail tax obligations for the shareholders they receive, even if the profits that provided the money needed to pay the dividends were already taxed at the company level.
(3) Enterprises of a Contracting State the capital of which is wholly or partly owned or controlled by one or more residents of the other Contracting State shall not be subject in the first-mentioned State to any taxation or related requirement constituting a tax other than taxation and related requirements than other similar enterprises of the former Contracting State. The State is or may be subject to. 2. The competent authority shall endeavour to resolve the matter by mutual agreement with the competent authority of the other Contracting State in order to avoid taxation not covered by the Convention if it considers that the objection is justified and if it is unable to find a satisfactory solution itself. To avoid these problems, countries around the world have signed hundreds of double taxation avoidance treaties, often based on models from the Organisation for Economic Co-operation and Development (OECD). In these treaties, the signatory states agree to limit their taxation of international trade in order to increase trade between the two countries and avoid double taxation. (2) The taxation of a permanent establishment owned by an enterprise of a Contracting State in the other Contracting State may not be levied less favourably in that other State than the taxation of companies of that other State carrying on the same activities. On the basis of the above logic, the applicability of the provisions of Article 44 is easier to identify. It is said that a taxpayer is entitled to this relief if a profit or income to be taxed in Nigeria has already been taxed in a Commonwealth country. If the income is eligible income under Article 23 of the CITA, it means that the income in Nigeria is exempt from tax and cannot be considered double taxation. However, if the profit is taxed under section 19 and is subject to the foreign tax of a Commonwealth country, the relief should apply.
CWTR is a double taxation relief introduced by the Nigerian government. Commonwealth profits brought to Nigeria are eligible for the CWTR, provided that the same profit is taxed in a Commonwealth country. Some investments with a direct flow or transmission structure, such as .B. Mastered limited partnerships are popular because they avoid the double taxation syndrome. A tax treaty is a written agreement between two countries that helps reduce the risk of double taxation and double non-taxation. In addition, a tax treaty indicates the category of income, the tax treatment in which that income would be taxable (place of residence, source or both) and the time of taxation. It also provides for the mutual agreement procedure (MAP) for the settlement of conflicts arising from the implementation of the agreement or the distribution of taxation rights. Nigeria has tax treaties with fourteen (14) countries. These are Belgium, Canada, China, Czech Republic, France, Italy, Netherlands, Pakistan, Philippines, Romania, Signapore, Slovakia, South Africa and the United Kingdom. .