Provisions of double taxation agreement with the UK with regards to:

i. Income from immovable property may be taxed in the country in which the property is situated (Article 6);

ii. Business profits not arising through a permanent establishment are to be taxed only in the country of the taxpayer’s residence. Profits attributed to a permanent establishment may be taxed in the country in which the permanent establishment is situated (Article 7);

iii. Profits or gains arising from the operation of ships and aircraft in international traffic are to be taxed only in the country of residence of the operator (Article 8);

iv. Dividends derived by one company which is resident in one country from a company resident in another country may be taxed in that country in which the dividend is derived. The withholding tax applicable in Nigeria is reduced to 7.5%; and

v. Interest arising in one country and paid to a resident of the other country may be taxed in that other country. The rate of tax in the source country is, in general, not to exceed 12.5 per cent. However, interest arising in one country and paid to the government or any government agency of the other country is to be exempt in the country of source (Article 11).

b. Foreign incomes exempted from Nigerian tax

With effect from January 1, 1988, investment incomes, namely; dividends, interests, royalties, and rents, derived by a company from outside Nigeria, are exempted from Nigerian tax, provided that such income is brought into Nigeria through government-approved channels.

Government-approved channels mean the Central Bank of Nigeria, any bank, or other corporate body appointed by the Minister as authorized dealers under the Second-tier Foreign Exchange Market Act or any enactment replacing that Act. In such situations, there would not have been any double taxation and therefore there would be no need to grant any relief in form of tax credit.

c. Resolution of conflicts between double taxation agreements (DTAs) and Nigerian tax laws include:

• Where a resident of a contracting State considers that the action of one or both of the contracting States result or will result in taxation not in accordance with this agreement;
• The competent authority shall endeavor, if the objection appears to it to be justified and if it is not itself able to resolve the case by mutual agreement with the competent authority of the other contracting State.
• The competent authorities of the contracting State shall endeavor to resolve by mutual agreement any difficulties or doubt arising as to the interpretation or application of the agreement; and
• The competent authorities of a contracting State may communicate with each other directly for the purpose of reaching an agreement in the sense of the preceding paragraphs.

d. Benefits of double taxation agreement include:

• Avoidance of double taxation;
• Clarification of taxing rights of each contracting State;
• Encouragement of economic cooperation between States;
• Prevention of fiscal evasion with anti-avoidance provision;
• Lowering of compliance cost;
• Promotion of bilateral investment between contracting States;
• Access to mutual agreement procedure (MAP) for dispute resolution;
• Non-discrimination in taxation matters; and
• Encouragement of uninterrupted exchange of information between the contracting States.