In the bid to facilitate more trade between Nigeria and Singapore, the Federal Executive Council (FEC) on Wednesday, 16 November 2016 approved a bilateral tax treaty between the two countries.
A bilateral tax treaty, also known as double tax treaty (DTT), helps to eliminate the double taxation of income arising in either of the countries and paid to residents of the other. Meanwhile, double taxation is the levying of tax more than once on the same declared income, asset or financial transaction, often by two or more jurisdictions.
Singapore has been a major trading partner with Nigeria. Therefore, some of the potential benefits of this development, particularly from a Nigerian perspective, are that it will:
- Encourage more foreign direct investments into Nigeria as investors will not be weary of double taxation
- Enhance job creation and opportunities as a result of increased investment
- Prevent tax evasion on income and capital benefits between Nigeria and Singapore
- Allow investors have better clarity of their tax obligations
- Streamline tax processes
- Ensure a relatively more predictable tax regime which would attract foreign investors
The DTT is yet to be ratified by the National Assembly; thus it remains inactive in Nigeria until approved.
We await further developments in this regard and would update you as more information become available.