If you have been following conversations about Nigeria’s tax reform bills, you may have come across concerns regarding a supposed reintroduction of inheritance tax.
The Chairman of Nigeria’s Fiscal Policy and Tax Reforms Committee, Taiwo Oyedele, recently addressed these misconceptions, explaining that the bills do not contain any provision for inheritance tax, either directly or indirectly.
Inheritance tax was abolished in Nigeria in 1996 when the Capital Transfer Tax Decree was repealed, and this position has not changed under the current reforms.
What then does the bill say about inheritance tax?
Inheritance is a one-time transfer of wealth, given either during someone’s life or after they pass away. Taiwo explained that Section 4(3) of the Nigeria Tax Bill does not apply to inheritance, as some people think.
This section refers to family income—money earned by a family as a whole under Nigerian law or custom—where you can’t separate each member’s share. Unlike inheritance, family income is about ongoing earnings, not a one-time transfer.
Imagine a family owns a large piece of farmland. The income from selling the crops grown on this land is considered family income under Nigerian law or custom because it’s shared among all family members, but no single person’s share can be specifically separated.
This is different from inheritance, which might happen if the head of the family decides to pass the farmland itself to one of the family members after their death.
Section 4 of the Nigeria Tax Bill explains what counts as taxable income. Section 4(3) ensures that income earned by a family as a group is still taxed, even if individual shares can’t be clearly separated. This aligns with existing laws like Section 2(5) of the Personal Income Tax Act, which also taxes family income in such cases. Simply put, families, communities, or partnerships earning income together can’t avoid taxes just because the income is shared.
If the income shares of each family member can be identified, they are taxed individually. But if the shares are unclear, the entire group is taxed as one. This ensures fairness and stops groups from avoiding taxes through loopholes.
Taiwo clarified that the tax reform bills do not introduce inheritance tax or place unnecessary burdens on citizens. Instead, they aim to create a fair and consistent tax system for everyone.
This is a developing story, and more updates on the Tax Reform Bill will be shared as they become available.
