Gratuities Are Tax Exempted, Says Tax Tribunal

  • Gratuities Are Tax Exempted, Says Tax Tribunal

The Tax Appeal Tribunal, South East Zone, has said that gratuities are tax exempted under the Personal Income Tax Act.

The tribunal made the declaration while delivering judgement in the appeal Nigerian Breweries Plc brought against Abia State Board of Internal Revenue, challenging the decision of the Board to tax gratuities paid to its employees.

The Appellant in appeal No. TAT/SEZ/002/17 set out three grounds of appeal, among which are “that Respondent (ASBIR), erred in law when it assessed the Appellant’s employees to tax on gratuities paid by the Appellant.”

The Appellant, through its counsel, Moshood Olajide, contended that under the finance (Miscellaneous Taxation Provision) No. 2 Decree 1996 amended section 3(1)(b) of PITA 1993 by deleting gratuities as income chargeable to tax.

That by the clear wording of the 1996 Decree, gratuities are no longer taxable, and, therefore, remained the extant position in the PITA 2011 (as amended).

He, therefore urged the Tribunal to discharge the assessment notice issued by the Respondent and a declaration that by the virtue of Decree 1996 all gratuities are tax exempt.

But the Respondent, through its counsel, Obike Onyemeru, urged the tribunal to dismiss the appeal and sustain the demand notice.

While he argued that there was no law expressly exempting gratuity in excess of N100,000 from tax, he contended that item 18(b) of the 3rd schedule to the PITA, CAP P. 8 LFN, 2011 (as amended) “has not been repealed and remains the extant law.”

About the Author

Samed Olukoya
CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and, with over a decade long experience in the global financial market. Contact Samed on Twitter: @sameolukoya

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