Police Trust Fund in Nigeria- How Companies must comply with this Payment

On 24 June 2019, the Nigerian President signed the Nigeria Police Trust Fund (Establishment) Bill (“Police Trust Fund Act” or “the Act”) into law. The Act establishes the Nigeria Police Trust Fund (Trust Fund) to provide funds for, inter alia, the training and welfare of personnel of the Nigeria Police Force. The Act also states that the Trust Fund would consist of funds from a levy of 0.005% of the net profit of companies operating a business in Nigeria amongst other sources.

Under Section 4(1)(b) of the Act, the FIRS is empowered to assess, collect, account and enforce the payment of the stipulated 0.005% of the net profit of companies in Nigeria, into the Police Trust Fund.

However, there is a recent controversy following the decision of the Federal High Court in the case of AG Federation and AG Rivers, where the Federal High Court held that the tax taken by the Federal government into the Federation Account and remitted to the Nigerian Police Trust Fund was illegal and contrary to the provisions of Section 161(1) the Constitution, which provides that taxes and other funds paid into the Federation Account are to be shared between the Federal, State and Local Government.

The debatable question becomes, where the purpose for which a Law is enacted is defeated, will there be need for such Law and its enforcement.

Considering the decision of the FHC and pending the challenging of the decision, it may seem that the enforceability of the Section 4(1)(b) of the Police Trust Fund Act; the decision may impact on the powers and ability of the FIRS, to henceforth collect the 0.005% levy imposed on the net profit of companies operating in Nigeria,

Companies operating in Nigeria are adviced to seek professional advice from their legal and tax advisors regarding their obligation to pay the 0.005% levy imposed on their net profits under the Act.

Team 618 Bees

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