Untitled Document
How Personal Income Tax Of Persons Resident In A Territory In Nigeria Should Be  Administered

Persons living in one state or territory in Nigeria may be working in another state for various reasons and the income of such persons is liable to tax. Indeed some of the residents will be engaged into activities from which they earn income that cut across several states. The question of where or who should tax such persons will be addressed in this short article based on the Personal Income Tax Act and the law as has been laid down over the years.   
Personal income is taxed statutorily by virtue of the Personal Income Tax Act. It provides that tax is to be imposed on the total income of every individual other than persons or corporation sole or body of individuals deemed to be resident for that year in the relevant State. The Act specifically made provision for persons resident in the Federal Capital Territory as exempt from the operation of the Personal Income Tax Act. For all other persons in the rest of Nigeria except members of staff of the armed forces, tax for any year of assessment may be imposed only by the state in which the individual is deemed to be resident for that year. Residence is treated by the Act hand in hand with income thus "earned income" in relation to an individual, means income derived by him from a trade, business, profession, vocation or employment carried on or exercised by him the duties of which are wholly or partly performed in Nigeria so that if a sales man covering the states in the South West of Nigeria resides in Ibadan and roves around the states to make sales from which he is paid commission, that income is not taxed in each of the states where it was earned as commission but in Oyo state where he resides.  "Place of residence" in relation to an individual, means a place available for his domestic use in Nigeria on a relevant day... "Principal place of residence" is defined by the Act as usual place of residence, the residence nearest to the employee’s usual place of work where he usually resides. It follows directly from the forgoing that anywhere a person earns income within Nigeria, such income shall be taxed by the territory where he resides. The Act is clear and unambiguous on where income is earned once the activity from which the income is derived is performed in Nigeria. Similarly it has copiously made provisions on who shall tax this income as the state in which the individual is deemed to be resident for that year. To buttress this point the Act has stipulated that persons resident in the F.C.T are exempt from the operation of Personal Income Tax Act so that if an employee of a bank with a branch in Mararaba, Nassarawa State resides at Karu or Nyanya in the  Federal Capital Territory and goes to work from there, he will not fall under the operation of Personal Income Tax Act nor be taxed by  Nassarawa state.

On the other hand, a person staying in Mowe in Ogun State and working on Victoria Island has his or her personal income tax due and payable to the state where he resides- Ogun State. This is because his income which is employment income (from his employer) is in Nigeria and the residence nearest to his usual place of work is in Mowe Ogun state. Also a person, who resides in Ogba-Ikeja and works with Punch at Magboro-Ogun State, shall pay his tax to the state where he is resident, Lagos. This also applies to persons living in Nassarawa from Mararaba through as far as Keffi but working in Abuja who shall have their income taxed by Nassarawa state.

There are judicial authorities on the definition of residence. In Leven v I.R.C (1928) A.C 217 @222 Viscount Cave L.C held “My lord’s the word ‘reside’ is a familiar English word and is defined in the Oxford Advanced Dictionaries meaning ‘to dwell permanently or for a considerable time, to have one’s settled, or usual place of abode, to live in or at a particular place’ Thus, the determination of the residence of an individual in a tax case shall be made in accordance with the ordinary meaning of the word. The word residence has no special or technical meaning. 

Personal income tax administration is a responsibility shared among the tax payer, the relevant tax authority and the employer. The provisions creating these responsibilities are made by the Act and the PAYE regulations. It is noteworthy that the state to which tax is due to it will lose income and by extension the residents of such states who should benefit the use of this money will also suffer dearth of infrastructure. It may therefore be argued that a state has a greater responsibility in the process of personal income tax administration. Besides the fact that the income is due to it, the state has the responsibility for enforcing law and order. We shall now look at how each of the parties involved; the state to which tax is due, the tax payer and the employer who statutorily should collect the tax on behalf of the relevant tax authority of a state are required to operate in the chain of tax administration.


An employer is required under the provision of the Act to make deductions from emoluments or amounts on account of emoluments paid by it to an employee and shall account to the relevant tax authority in such manner as the relevant tax authority may prescribe for the deductions so made, and in the event of failure by the employer to make the deduction, or properly to account thereof, the amount thereof together with a penalty of 10 per centum per annum of the amount plus interest at the prevailing commercial rate shall be recoverable as a debt due by the employer to the relevant tax authority .

An individual who holds a Nigerian employment on the 1st day of January in a year of assessment, or who first becomes liable to income tax in Nigeria for that year by reason of his entering that employment during that year, shall be deemed to be resident for that year in the territory in which he has a place or principal place of residence on that day or, as the case may be, on the day on which he enters upon the full duties of that employment in Nigeria. This clears the seeming ambiguity as to where to pay tax.

It also distinguishes Nigerian employment from foreign employment in which case the tax payer shall be deemed to be resident for that year in the territory in which the principal office of his employer is situated on that day or on the day his foreign employment commences, as the case may be. Similarly pension is to be taxed by the territory of which government is paying the pension or the territory where the principal office of the pension fund is situated in case where the pension is not a Nigerian pension, further a corporation sole or body of individuals shall have its income taxed in the territory where its principal place of business is situated or it derives its income. The Act further raises and addresses the issue of dispute in respect of territory to which tax is due and payable. This presupposes that the question of territory is not static and an individual could be subject to one territory or another at different times hence underlines residence as the place of payment of tax of employment income at all times of an individual.     

The duty of the tax payer under the Act is provided by section 41 of the Act and it requires that a taxable person shall, without notice or demand therefore, file a return of income in the prescribed form and containing the prescribed information with the tax authority of the State in which the taxable person is deemed to be a resident together with a true and correct statement in writing containing the amount of income, particulars necessary for tax reliefs and a declaration of the truth of such facts.  Section 42 of the Act provides for punishment and the place of an offence where failure to comply with a requirement lawfully made by a tax authority of a territory under a provision of this Act constitutes an offence by virtue of the provision of an enactment of that territory, then the offence shall be deemed to have been committed at the place from which the notice of that requirement was issued by that tax authority, or at the place where the person charged with the offence resides or at such other place as that tax authority may decide.

It behoves on the state in whose territory a tax payer is resident to take steps which will enhance its power to collect the revenue by making the relevant laws or regulations, issuing notices and where applicable enter into premises or summon persons resident in its territory to provide information in accordance with the provisions of the Act. As a last resort the relevant tax authority may sue in accordance with the provisions of the Act to recover its tax revenue from employers of persons resident in its territory. In this way such states will bring into effect the provisions of the Act and boost the revenue of the state. Further, a state may through the joint tax board persuade other states in custody of its tax revenue to remit same to it.

The Role Of The Flag State In Vessel & Sea Safety And Marine Security

Flag state denotes the government whose flag the ship is entitled to fly and by extension the department of such country responsible for the administration of ships and shipping activities. A vessel will usually bear the flag of the country which she has the closest connection, lex loci. Although other considerations such as commercial interest or in some cases the terms of a ship’s charter in government contracts could determine the flag to be flown by a vessel. A ship may also fly ‘flag of convenience’. The essence of these is to address legal questions that might arise in the course of shipping trade. Some scholars have argued for vessels to have their sovereignty. The maritime administration of a state has overall responsibility for the implementation and enforcement of international maritime regulations for all ships granted the right to fly its flag. Ships, like citizens according to the International Maritime Organization’s standards must have a name and nationality. The flag which a ship flies hence its state of origin will affect patronage to its fleet due to its substance, also such vessels may reduce turnaround time at other ports lost to inspection if they  have established a reputation of compliance with regulations as there may be no need for scrutiny. 
While it is shipping companies that have primary responsibility for the safe operation of their ships and the safety and welfare of their crews, the flag state plays a critical role with regard to the safety of life at sea and the protection of the marine environment. It is the flag state that has overall responsibility for the implementation and enforcement of international maritime regulations for all ships ‘flying its flag’. Effective regulation by governments of the technical and social aspects of shipping is therefore vital to ensure safe, secure and pollution-free ship operations and good employment conditions for seafarers. Flag states also have responsibility for the implementation and enforcement of rules adopted by other intergovernmental bodies, including the International Labour Organization (ILO) and the International Oil Pollution Compensation (IOPC) Fund. ILO governs standards of seafarers’ employment. The IOPC Fund ensures that victims of any major maritime oil pollution incident receive adequate compensation without undue delay. The flag state which a ship flies its flag has varying degree of effect on its commercial enterprise. Two parties are therefore dependent upon each other on the issue of flag state administration; the shipping company and flag state authority. The shipping company, and not least its charterers, may also have general concerns about the implications for its corporate reputation of being associated with a poorly performing flag, even if the company’s ships are fully compliant. But the overriding interest in promoting high performing flag states is that they are less likely to tolerate sub-standard operators. Where a shipping company fly the flag of states with higher than average non-compliance vessels the tendency for port delays due to inspection will be high too and can mean unnecessary delays, plus greater potential for charterers’ penalties.

In this regard a flag sate should have sufficient infrastructure in terms of offices, qualified and competent staff, and equipment to meet international obligations in ensuring compliance with and maintenance of standards to qualify for an effective and good flag authority and to meet its obligations under international treaties. As a minimum, flag states should be expected to have ratified the following core international maritime conventions: International Convention for the Safety of Life at Sea, International Convention for the Prevention of Pollution from Ships, International Convention on Load Lines, International Convention on Standards of Training, Certification and Watchkeeping for Seafarers, International Labour Organization Merchant Shipping (Minimum Standards) Convention 1976, International Convention on Civil Liability for Oil Pollution Damage. The Merchant Shipping Act is the local law in Nigeria that stipulates regulations for ships and shipping. A responsible flag state should be able to provide a valid explanation for not having ratified any of the above, and in practice should be expected to implement and enforce national regulations that comply with the vast majority of the detailed requirements contained within these international regulations. It is reasonable to expect flag states to have implemented the detailed requirements of the international maritime treaties listed above, and to have established effective mechanisms for their enforcement. For example, SOLAS, amongst other conventions, provides for regular ship surveys and the issue of certificates of compliance by the flag state, while STCW requires certification of crew competence.

In order to achieve standards implementation a flag state should in accordance with IMO Resolution A.739, establish appropriate controls over organizations, such as classification societies, nominated to conduct statutory surveys of ships on their behalf. Such controls should include determining that the organization has adequate resources for the tasks assigned, and entering into a formal written agreement covering the issues specified in A.739. Flag states should specify instructions detailing actions to be followed in the event that a ship is not found fit to proceed to sea, and provide information concerning national regulations that give effect to international maritime conventions. A verification and monitoring system should also be established to ensure the adequacy of work performed by organisations acting on a flag state’s behalf. Usually flag states will prefer members of International Association of Classification Societies. Similarly flag states shall be responsible for overseeing the International Safety Management Code through issue or withdrawal of ships Safety Management certificate (SMCs). Further the flag state will oversee maritime security, seafarers’ competence standards, employment standards, safe manning and seafarers working hours, casualty investigations, movement of ships between flags, repatriation of seafarers, participate in flag state audits of the IMO, and ILO meetings and work in consultation with ship owners.

As the twin Acts of Cabotage and Local Content take centre stage in Nigerian it behoves her that, conventions that have not been ratified be ratified and those already ratified be domesticated into our laws to give the flag state authority, the Nigerian Maritime Administration and Safety Agency which is already working hard at capacity building the teeth to enforce standards. Private  ship owners as well as service, technical and financial providers such maritime lawyers, banks, ship surveyors, ship and dock yards etc  also owe a duty to build capacity and do appropriate consultations in order to ensure compliance with these requirements so as to assist the flag state in keeping standards and in that way the whole economy gains. We must all gird our loins!

The Rotterdam rules as it applies to Nigeria

The gift of endowment of different parts of world in natural resources, their technological advancement and science,  purchasing power, consumption pattern which could be due either to the level of development or taste will all combine to lead to production of goods and services in one end of the world and consumption in another. These goods will have to hauled to their end users. The most convenient means by which the world trading community has developed to convey these goods is by sea due to their tonnage.  And rules have been developed over time to regulate such carriage of goods by sea in order to protect the interest of world commerce. 

The Rotterdam Rules are the result of Intergovernmental negotiations that took place between 2002 and 2009. These negotiations took place within the United Nations Commission for International Trade Law (UNCITRAL), after the Comite Maritime International (CMI) had prepared a basic draft for the convention. On 11th December 2008, the General Assembly of the United Nations adopted the rules. The rules govern the Carriage of Goods by Sea and connection or previous transport by land. Further the convention puts in place the infrastructure for the development of e commerce in maritime transport. This will mean less paper work. The shorter turnaround time will reduce the chance of errors and lower costs. The government and people of Netherlands graciously allowed and hosted the signing of the rules in Rotterdam hence the name.

In Nigeria, the choice of venue for the discussion of the newly promulgated International Convention on the Carriage of Goods Wholly or Partly by Sea (The Rotterdam Rules) which is the most recent of the rules, Ocean view restaurant in Lagos between 8-10 December 2009 was most appropriate as participants listened to the discourse with the din of vessels’ hooting in the background as they sailed on the Atlantic to berth at the Apapa quays. They were drawn from maritime legal practitioners, port users, Federal Ministry of Transport and its Agencies as well as the services industry in the logistics chain in Nigeria and Ghana. They also included distinguished Senators, Members of House of Representatives, and the Nigerian and Ghanaian shippers’ councils.
The formal regulation of carriage by sea began in late nineteenth century with the Harter Act 1893, prior to this, transactions were governed by common law and the Harter Act was followed by The Hague, Hague-Visby and Hamburg rules. The Rotterdam rules are a departure from the earlier rules mainly because in addition to the carriage by sea it encompasses the carriage of goods other than by sea. It represents the most comprehensive overhaul of the law of carriage of goods by sea in more than fifty years.  In international trade, carriage of goods take a critical position for the reason that once the buying and sale of goods is concluded, the need for the goods to be hauled to the point where the purchaser needs them which sometimes it’s a great deal of mileage across the globe and involves a lot of people and factors arises. In this process ninety per cent of goods involved in global trade is hauled by sea but it is necessarily also transported by land. It is for this reason that the question of allocation of liability becomes pertinent to protect the interest of global commerce.

The previous rules of carriage dealt with carriage by sea only, with Hague-Visby rules regulating the bills of lading, it being a contract of carriage of goods or evidencing contract of carriage, but The Rotterdam rules have expanded this to include carriage by land. For instance, if Uranium departs Niamey, in land locked Niger for Moscow in Russia it inevitably will have to be carried partly by land and partly by sea, so is a cargo of soya beans that leaves Makurdi, in Benue State Nigeria for Tehran, in Iran. In the previous rules which are a precursor to the present one, the concern was mainly carriage by sea which is almost entirely in the realm of international law and Nigeria had to simply domesticate the rules as Carriage of Goods by Sea Act (COGSA) and apply it as situations demanded. This is not the case in the present rules. I shall attempt here to give an appraisal of The Rotterdam rules in order to highlight the need for a proactive approach on the part of Nigeria for an effective adoption and incorporation of the rules in the Nigerian Legal System with respect to the leg of the rules that concerns carriage other than by sea.

The Rotterdam rules provides in Article 1 (1) for ‘contract of carriage’ as a ‘’means of contract in which a carrier, against the payment of freight, undertakes to carry goods from one place to another. The Contract shall provide for carriage by sea and may provide for carriage by other modes of transport in addition to the sea carriage’’
It follows therefore that when the contract for carriage is other than by sea, it will more often than not be transported by land, which is by road or rail road. This is on the assumption that cargo conveyed by sea is not likely to be transloaded unto a plane within a country which is a signatory to the convention because of the tonnage of goods carried by sea. Article 1 (27) of the same rules provides ‘Vehicle’ to mean ‘.. a road or railroad cargo vehicle’thus clearly excluding air transport when goods have left the sea voyage.

The scope of application of the rules as provided in Chapter 2, Article 5 provides that ‘’ subject  to Article 6, …applies to contracts of carriage in which the place of receipt and the place of delivery are in different States, and the port of loading of a sea carriage and the port of discharge of the same carriage are in different States, if, according to the contract of carriage, any one of the following places is located in a contracting State: (a) The place of receipt (b) The port of loading (c) The place of delivery (d) The port of discharge. The important points being theplace of receipt and the place of delivery which could be inland of a contracting State destined for another contracting State respectively and would of necessity require carriage first by land before carriage by sea could commence and after arrival at the port will have to be taken to a point of delivery by land. Article 12 which talks about the Period of responsibility of the carrier stipulates that the period of responsibility begins when the carrier receives the goods for carriage and ends when the goods are delivered and that if the law or regulations  of the place of receiptrequire the goods to be handed over to an authority or other third party from which the carrier may collect them, the period of responsibility begins when the carrier collects the goods from the authority or third party  so also in the case of delivery and if the law of the place of delivery provides that it be delivered to a third party or authority in both cases. Article 38 (2) states that, an electronic transport record shall include the electronic signature of the carrier or a person acting on his behalf. Such electronic signature shall identify the signatory in relation to the electronic transport record and indicate the carrier’s authorization of the electronic transport record. It follows that in order for Nigeria to apply the rules it must first have a law or regulations for carriage of goods by land and one which allows admissibility of electronic evidence. This is because the evidence act does not explicitly makes provisions for admissibility of electronic evidence the same way it has done for documentary evidence. The electronic records being critical to these transactions and especially that it constitute a negotiable instrument commanding sometimes very great sums of money, controversy surrounding it could get deeper and makes the value of  legal of issues therein very important.
Article 2 of the rules requires that in the interpretation of the convention, regard is to be had to its international character and to the need to promote uniformity in its application and the observance of good faith in international trade thus underlining the need for local laws as demanded by the convention.

These rules are to come into effect one year after the 20th country has ratified it and this was done on 23rd October 2009 by Niger being the 20th signatory. Nigeria had signed on the 23rd September 2009 and was in fact well represented at the Comite Maritime International at various venues including New York, Paris, Johannesburg etc in preparing the basic draft. Thus the convention will come into effect on 24th October 2010. But before international treaties are implemented in Nigeria, Section 12 (1) of the Constitution of the Federal Republic of Nigeria 1999 provides that ‘’no treaty between the Federation and any other country shall have the force of law except to the extent to which such treaty has been enacted into law by the National Assembly’’.
The overriding reason for the formulation of the The Rotterdam rules is to take care of door-to-door carriage of goods and the inclusion of the electronic documentary evidence which in some cases confer title on the holder of the document. The Rotterdam rules are applauded for laying the foundation for the advancement of world commerce through use of electronic document as means of proof of ownership of goods and door-to-door carriage of goods. Nigerian being a high cargo generation country due to crude oil and as a cargo receiver country will greatly benefit from these rules.

The lacunae in our laws as identified above to take care of the provisions of the new rules give rise to the need to promulgate laws which will fill these gaps before the rules are finally brought into force especially the amendment of the evidence act to accommodate admissibility of electronic evidence and the promulgation of a law for Carriage of Goods by Land.
 This paper call on the National Assembly and the relevant government agencies to rise to the occasion.




Practice Area
{} Maritime & Admiralty Law
{} Intellectual Property Law
{} Business Reconstruction
{} Company Incorporation
{} Sale and Carriage of Goods
{} Litigation & ADR
{} Real Estate and Property
{} Infrastructure Law
{} Taxation
{} Succession and Probate


<> How Personal Income Tax Of Persons Resident In A Territory In Nigeria Should Be  Administered
<> The Role Of The Flag State In Vessel & Sea Safety And Marine Security
<> The Rotterdam rules as it applies to Nigeria