Nigeria Tax Issues: The Legal Regime Of Advance Tax Ruling (ATR)

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  1. Introduction

Only few occasions could ever be more certain than death and taxes. In advanced commercial climes in fact, failure to comply with tax obligations might just mean the beginning of the end for an entity. In a world of constant drive for economic and fiscal efficiency, individuals and corporations occasionally seek in advance, the opinion of relevant tax authorities (RTA) on the tax incidence and liabilities applicable to specific transactions or commercial arrangements. This occurs especially where the transaction has complex elements.

The resultant advance opinion received from the RTA is regarded as an Advance Tax Ruling (ATR). The concept of ATR is regarded highly because it provides taxpayers with information directly from the administrators of the taxes applicable to the envisaged transaction. Curiously though, ATRs are neither popular in Nigeria nor governed by specific enactments or laws.

This article examines the concept and importance of ATRs in Nigeria and other jurisdictions. It concludes with some crucial recommendations.

  1. What is an Advance Tax Ruling (ATR)?

According to the OECD’s Glossary of Tax Terms,[1] ATR is defined as a ‘letter ruling which is a written statement, issued to a taxpayer by tax authorities, that interprets and applies the tax law to a specific set of facts.’ It is often described as a written advisory by an RTA regarding the tax implications of an instant or proposed transaction or an assessment relating thereto. It is generally intended to promote clarity, stability, and certitude regarding the interpretation and application of applicable tax laws on a subject matter.

ATRs are quite popular in many OECD (Organisation for Economic Cooperation and Development) and non-OECD jurisdictions. It is a typical feature in countries with well-developed tax systems, such as the United Kingdom, the United States of America, Germany, South Africa, and the Netherlands, to name but a few.

Moreso, many jurisdictions have different legal regimes of ATR administration. In some jurisdictions, one is not required to pay any sum of money to apply for ATRs.

The advantages of Advance Tax Ruling cannot be overemphasized as it generally provides clarity to a taxpayer and enhances certainty of tax treatment of a transaction. It is a good means of providing information to a burdened taxpayer. Additionally, ATR will increase capitalist confidence within the legal system because it is sometimes requested wherever that transaction is going to be entered into in the future or is under serious contemplation by the taxpayer and as a result also promotes the ease of doing business.[2] ATRs additionally encourage tax law compliance to ensure that a self-assessment system runs smoothly. It also improves collaboration and makes the legal system more efficient by strengthening the connection between taxpayers and tax officials.

However, despite the potential benefits of ATR for a country’s tax system, it is not without flaws. It has been pointed out that ATRs can be quite expensive to administer, particularly in developing countries. Some people believe it could also result to the privatization of tax laws. However, to address this concern, some countries (for example, Canada) have imposed a time-based fee for each ATR application. Consequently, the imposition of such a fee could be seen as undermining the goal of equal access to the advance tax ruling system, particularly for low-income taxpayers.

Some researchers have proposed that ATRs should not be designed to respond to a taxpayer’s queries relating to their general affairs, or to a speculative transaction, which tax authorities typically address through other programs and facilities.

  1. Advance Tax Ruling in Nigeria

In Nigeria, there is no FIRS circular whatsoever governing the process or requirements for requesting for and obtaining an ATR. However, the FIRS has a Tax Policy and Advisory Department whose function is to provide tax rulings on tax issues based on information provided by the Taxpayer.

Thus, a person requiring clarification on any tax issue is expected to write to the Executive Chairman of the FIRS seeking the attention of the Director of the Tax Policy and Advisory Department on the tax issue. Also, it is important to note that there is no fee applicable on a request for tax rulings in Nigeria.

  1. Binding Legal Force of an Advance Tax Ruling

In most jurisdictions, an ATR binds only the applicant who requests it, as well as the concerned officer or jurisdictional officer of the RTA in the applicant’s case.[3] In other words, an ATR is binding on the issuing tax authority and is only valid for the transaction for which it was issued. This general principle, however, is not applicable in Nigeria.

Unfortunately, the fact that Nigerian tax administrators are not bound by the ATRs they issue results in a negative attitude towards ATRs. Most taxpayers would prefer to rely on private sector tax experts rather than seek an ATR from the tax authorities.

In the case of FBIR v. Halliburton (WA) Limited,[4] the Respondent, Halliburton (WA) Nigeria Limited relied on representations contained in a circular issued by the appellant (FBIR) regarding a transaction as creating a legitimate expectation in its favour. The Court of Appeal, however, relied on the fact that the appellant had not made full disclosure of the income from the transaction and that in the absence of full disclosure by the appellant in the first exercise, the appellant could not reap the benefit from the doctrine of legitimate expectation which is rooted in utmost good faith by stakeholders concerned with tax matters.[5] The Court also held that clear or unambiguous statutory words dealing with additional assessment to tax of taxpayers, would override any legitimate expectation (howsoever) founded.

Another issue that could arise is the outcome of situations where an issued ATR contains a tax position which is inconsistent with extant laws. In the case of Saipem Contracting Nigeria Limited & Ors. v. Federal Inland Revenue Service & Ors,[6] the dispute was on the tax liability of the Appellants on a contract. The Appellants (i.e., Saipem) claimed that the 1st Respondent (i.e., FIRS) had advised that it was not liable to taxation on the offshore components of its contract with the 3rd Respondent and that the 1st Appellant would not be liable to pay Withholding Tax on its Metal Fabrication activity, a representation which the Appellants believed and pursuant to which they entered the said contract with the 3rd Respondent. The contention of the Appellants (Saipem) was that based on extant taxation laws and regulations, they were not liable to pay Value Added Tax, Withholding Tax and Company Income Tax on the said contract.

The Appellants, as plaintiff consequently took out an originating summons before the Federal High Court, Lagos to determine whether the 1st Defendant (i.e., FIRS) is not estopped or otherwise prevented from resiling from its earlier written representation to the Plaintiff Consultants (i.e., Saipem) that they are not liable to pay Value Added Tax, Companies Income Tax and Withholding Tax on Metal Fabrication, being a manufacturing activity in Nigeria. Saipem claimed various reliefs including an injunction. However, the Federal High Court refused the reliefs claimed by Saipem except as it related to Value Added Tax (VAT) – that they were not liable to pay. Saipem was dissatisfied with this decision and appealed.

In determining the question at the Court of Appeal as to whether the 1st Respondent (FIRS) can resile from its position issued to the Appellant, the 2nd Respondent submitted that the Appellants cannot found their action on estoppel since estoppel can only be used as a shield and not as a sword.

In response, the Court of Appeal held the 2nd Respondent’s contention to be a statement of the general rule which in appropriate cases has applicable exceptions. The Court reasoned that estoppel may be employed as a sword where a party relying on estoppel did not predicate their cause of action on estoppel alone, as in this case. The court in determining the question was concerned about what the representation was about, when the representation was made and whether the Appellants (i.e., Saipem) altered their position in acting on the representation of the FIRS.

The Court of Appeal found that Saipem entered the contract with the 3rd Respondents on 27th August 2009 while the letter/representation was made on 17th March 2011, almost two years after the contract had been entered. Thus, clearly, the Appellants could not have altered their position vis-a-vis the contract since they had already entered the contract before seeking advisory on their tax liability.

Furthermore, the Court of Appeal held that no estoppel would apply against the 1st Respondent (i.e., FIRS) and that the 1st Respondent is not estopped from applying the provisions of the law in determining the tax liability of the Appellants in respect of their contract with the 3rd Respondent.


Clearly, the Court of Appeal in Saipem’s case did not directly answer the question of whether the FIRS can reverse its ruling or representation. The ratio decidendi, on the other hand, points to some salient points. Firstly, for an ATR to be binding on the RTA, it must have been applied for before the relevant transaction or contract is entered and/or commenced. Arguably, the decision in Saipem’s case might have been different if the facts showed that Saipem entered the contract with the 3rd Respondent after and based on the representation of the FIRS.

Secondly, as shown by the Halliburton decision, an individual or corporation seeking an ATR must lay bare or disclose all relevant facts about the applicable transaction/contract. Where a party fails to fully disclose its income, the portion that is hidden must be taxed by the authorities when discovered.

Thirdly, regardless of whether a ruling was issued to the contrary, if an additional assessment by the RTA shows that an individual, corporation, or transaction should be mandatorily taxed pursuant to a statute, it would be irrelevant, as statutory provisions generally override any ruling or circular.

  1. Conclusion and Recommendations

The benefits of ATR cannot be overstated. However, it can be quite difficult to administer, particularly in a developing legal system like Nigeria. For a tax-conscious government to effectively administer ATRs, the country’s ease of doing business policies and taxpayer confidence must be critical considerations.

Consequently, the following are recommendations that may be introduced by way of subsidiary legislations by RTAs:

  1. Limiting applications for ATR to novel/uncommon and complex transactions that have not been previously addressed by the RTA.
  2. Save in exceptional circumstances, ATRs should be made binding on the issuing RTA in favour of the taxpayer to whom it was issued. Such circumstances may include:
  • Where taxpayer withholds information that could have impacted the ruling differently as seen in the case of FBIR v Halliburton West Africa Limited.
  • Where a party does not rely on the representation contained in the ATR.
  • Where the ATR is expressly inconsistent with extant tax laws.

With constantly emerging global trends in commercial transactions and the teeming impact of digital technology, it is crucial for the Nigerian government to urgently begin a thorough contemplation aimed at introducing a clear legal regime for ATRs. Undoubtedly, this will further develop the Nigerian tax jurisprudence. It will also enhance ease of doing business and engender long-term improvements in the quality of tax professionals within the tax administration public sector space.


For further information on this article and area of law, please contact

Olukolade O. Ehinmosan at S.P.A. Ajibade & Co., Lagos

By Telephone (+; +234.1.460.5091) Fax (+234 1 4605092)

Mobile (+234 815 0865 646 +234 815 9794 230)



[1]     OECD, Glossary of Tax Terms <> last accessed 16 June 2022.

[2]     Mr. Christophe J Waerzeggers and Mr. Cory Hillier ‘Introducing an Advance Tax Ruling (ATR) Regime (31 May 2016)> accessed 24th June 2022 at 10:39 am.

[3]     Ibid.

[4]     [2016] 4 NWLR (Pt. 1501) 53.

[5]     Per IKYEGH, JCA at page 98, paras. E-G.

[6]     (2018) LCN/11674(CA) – Appeal No. CA/L/436/2014 – unreported judgment of the Court of Appeal delivered on 10 July 2018).

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