Gratuities Are Exempted From Tax, Says Tax Tribunal

The South East Zone of Tax Appeal Tribunal, on Friday 21st June, 2019 ruled that gratuities are tax exempted under the Personal Income Tax Act (PITA).

In 2017, Nigerian Breweries PLC filed an appeal before the tribunal challenging the decision of the Abia State Board Internal Revenue to tax gratuities paid to its employees, contending that the Abia government erred when it assessed its employees to tax on gratuities paid by them.

Through its counsel, Moshood Olajide, Nigerian Breweries PLC argued that gratuities were no longer taxable, and therefore, remained the extant position in the PITA 2011 (as amended) and urged the tribunal to discharge the assessment notice issued by the respondent and declare that by virtue of Decree 1996, all gratuities in tax are exempted.

But, Abia state government through its counsel, Obike Onyemeru urged the tribunal to dismiss the appeal and sustain the demand notice. Delivering judgment in the appeal, the three-man panel of tribunal agreed with the submissions of the appellant and resolved the three grounds in his favour.

Chairman of the tribunal, Chukwuemeka Eze who read the judgment cited the decision of the supreme court which held that “it has been settled principle of statutory interpretation that although schedules of a statute can be useful handmaid in construing the provisions of a statute, they cannot however be interpreted to over-rule the plain words in the body of the statute,” and held that Paragraph 18(b) of the 3rd Schedule to the PITA does not apply to the appellant.