Impact of the Nigeria Police Trust Fund (Establishment) Act 2019, on Companies Operating in Nigeria- Imposition of 0.005% Levy

April 15, 2020

On 24th June 2019, the President Buhari signed the Nigeria Police Trust Fund (Establishment) Bill into law. The Act, which will be in force for six (6) years, establishes the Nigeria Police Trust Fund (NPTF) to, among other things, provide funds for the training and retraining of personnel of the Nigeria Police Force (NPF), provide them with state-of-the-art security equipment, to improve the general welfare of the personnel of the NPF, and enhance their preparedness. The NPTF in essence seeks to achieve an overall improvement in the efficiency of the NPF, including its auxiliary staff in Nigeria and abroad. Levy Imposed on Companies Operating in Nigeria

According to the Act, the NPTF shall be funded from the following sources:

• 0.5% of the total revenue accruing to the Federation Account;

• a levy of 0.005% of the net profit of companies operating a business in Nigeria;

• any take-off grant and special intervention fund as may be provided by the Federal, State or Local Government;

• monies appropriated by the National Assembly in the budget to meet the objective of the Act;

• aids, grants and assistance from international agencies, non- governmental organisations and the private sector;

• grants, donations, endowments, bequests and gifts (whether of money or property) from any source; and

• money derived from investments made by the NPTF

Impact on Companies Operating in Nigeria

1. The levy –Section 4 of the Act imposes a 0.005% levy on the net profit of companies operating businesses in Nigeria.

2. Liability of foreign entities – This Act, by implication, seems to also impose the levy on foreign entities where they may have a permanent establishment or fixed base in Nigeria. For foreign companies providing digital services across territorial boundaries, the issue of significant economic presence (SEP) arises and could potentially draw them within the ambit of the Act. Though the concept of SEP was introduced into Nigeria by the enactment of the Finance Act, the Finance Act leaves the determination of what constitutes a SEP to the Minister of Finance.

3. Tax Deductibility of the Levy – The Act is silent on whether or not the levy is tax deductible when computing companies’ income tax. However, Section 27(c) of the Companies Income Tax Act provides, inter-alia, that a levy on profits of a company is not tax deductible.

This levy, in our view, is an additional tax to those already suffered by companies in Nigeria such as companies income tax, education tax, information technology development agency levy (payable by companies in the financial and information and communications technology industries) and local content development fund levy (payable by companies operating in the oil and gas industry).


The Act is silent on which agency of government is responsible for collection of the levy. Ordinarily, one would expect that the Federal Inland Revenue Service would be responsible for the collection and enforcement of the levy as it is computed based on the profit of

a company. This would also save collection costs. Though the Act sets up a Board, the Board is mostly responsible for setting out the policies and programs for meeting and carrying out the objectives of the Act and such other activities as are considered necessary for the attainment of the objectives of the Act. The Board is not charged with collection of the levy or enforcement of the Act.


In our opinion, this is one tax too many for Nigerian companies to shoulder. It is also exacerbating the lingering problem of multiple taxation (or over-taxation) suffered by Nigerian companies. It would seem that once a funding need is identified by the government, a new law is passed to place an additional tax burden on Nigerian companies.

There are also a number of issues that the Act is yet to address. They include the nature of the levy, its tax treatment, collection and enforcement. Equally concerning is the fact that the Act does not define what “net profit” (upon which the levy is to be imposed) is. This should not be the case in a taxing legislation. There are several decided cases that have clearly indicated that there should be no ambiguity in a taxing legislation.

As laudable as the initiative maybe, the law as drafted still leaves a lot more to be desired.

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