The Nigeria Police Trust Fund (Establishment) Act was signed into law on June 24, 2019. Its key objective is the establishment of a fund to cater for the training and provision of security equipment and related facilities for the Nigerian Police Force. Section 4(1) of the Act created seven sources of funds for this purpose, but the trending and controversial aspect of the fund is the “levy of 0.005% of the net profit of companies operating business in Nigeria” as provided in Section 4(1) (b). While the introduction of this levy has been roundly criticized for heightening the tax burden of doing business in Nigeria, the major pitfall of the enabling law lies in the vagueness of its key terms, which may greatly impede enforcement of the levy. This piece identifies and discusses some of the vague provisions.


By Section 4(1) (b) of the Police Trust Fund Act, the 0.005% levy shall apply to “companies operating business in Nigeria.” The Act failed to define this expression, and hence created the question: Which companies are in the purview of those “operating business in Nigeria”; or when can a company be said to be “operating business in Nigeria.”?

By virtue of the Companies and Allied Matters Act (CAMA), only companies incorporated in Nigeria and those expressly exempted from such incorporation can legitimately operate business in Nigeria. Section 54 of CAMA forbids a foreign company to carry on business in Nigeria until it is registered in Nigeria, with the exception of foreign companies in certain categories who obtain Presidential exemption from the requirement of incorporation under Section 56 of CAMA. Section 60 (a) of CAMA however emphasizes that the companies so exempted from incorporation are not by that reason, further exempted from other enactments or rule of law. Section 60(a) implies that foreign companies operating in Nigeria with exemption from incorporation under CAMA, just like all companies incorporated in Nigeria, are subject to other Nigerian laws besides CAMA, which include the Police Trust Fund Act.

But it is not only the two categories of companies captured above that derives business profits from Nigeria. Tax law, precisely the Companies Income Tax Act (CITA) identifies and subjects to tax, non-resident companies which, though not by themselves operating in Nigeria, nonetheless derive profits from Nigeria through their related entities that are resident in Nigeria. CITA in its Section 9 taxes the profits of any company accruing in, derived from, brought into, or received in Nigeria, while its Sections 13 and 30 rope into tax the profits of non-resident companies earning profits in Nigeria through fixed bases or dependent agents, or executing turnkey projects. Would the Police Trust Fund Levy also apply to such non-resident companies earning profits in Nigeria? There are two reasons why it may not.

Firstly, while CITA subjects the non-resident companies to tax, and sets out clear modalities for the assessment of the tax, the Police Trust Fund Act does neither. CAMA’s Section 54 clearly delimits the scope of companies operating business in Nigeria, while its Section 60(a) subjects the companies so defined to the effect of other laws. Therefore, any other law that intends to create an additional category of companies to the range set by CAMA must expressly state the new category. CITA expressly added a new category by capturing non-resident companies deriving profits from Nigeria through resident entities. The Police Fund Act expressed no such intention, and so the Nigerian profits of non-resident companies cannot be subjected to the Police Trust Fund Levy by mere assumption.

Secondly, taxation of the global profits of Nigerian companies and the Nigerian profits of non-resident companies under CITA is palliated by several measures. One is the Double Taxation (Avoidance) Treaties which guard against multiple taxation of the same profit across tax jurisdictions. There are no such palliatives in the Police Trust Fund Act if the Police levy is to transcend national boundaries.


If the ambit of companies liable to the levy is resolved, a knottier complexity still lies in determining what is to be paid as the levy. Section 4(1) (b) of the Act subjected the “net profit” of companies to the 0.005% levy without defining the term “net profit.” Net profit could be profit before tax, with the deductibles that are allowed for income tax computation.

Contrariwise, it could be profit after tax. The Act also failed to specify the sources of profits liable to the levy. It sets no parameters for the determination of net profit for the purpose of the levy, without which, the levy cannot be enforced. No specific deductions are required before net profit is arrived at.

CITA elaborately states the sources of the profits that it taxes, and provides the modes of computation, with the allowable deductions that precede taxation. With this silence of the Police Trust Fund Act on the scope of “net profit”, grave challenges would be encountered in assessing companies to the levy. The foreseeable contentions would be: what is the net profit of which 0.005% should be paid? which deductions would result in the net profit to be taxed? and what computation would yield the net profit for the purpose of the levy?


The Act created yet another hitch to its objectives by only setting up a body that would manage the fund. This body, designated the Nigerian Police Trust Fund is empowered by Section 6(1)(a) of the Act to receive all moneys accruing to the fund, and by implication, to assess and collect the Police Trust Fund Levy. While it may be convenient to place management of a trust fund on an ad hoc body,

assessment and collection of taxes and levies can only be efficiently discharged by an agency of professionals with the requisite technical competence. This necessity becomes emphatic in the case of the Police Trust Fund Levy when the nebulous term, “net profit” which is key to the levy as discussed above is considered.

Only a specialized body like the Federal Inland Revenue Service (FIRS) can properly assess 0.005% of the net profit of companies for collection. It was for such consideration that the Tertiary Education Trust Fund Act set up an ad hoc body to administer the fund, but still vested the assessment and collection of Education Tax under that Act in the hands of FIRS. That should have been the direction of the Police Trust Fund Act.


The efficacy of a law is mostly founded on its sanctions. What are the consequences of non- compliance with the Police Trust Fund Act? The Act is silent on mode of enforcement of the levy and consequences of non-compliance. The effect of these omissions is far-reaching. Criminal and civil liability for breach of a law, more so a revenue-based law, must be expressly provided for, and never implied. That is why tax law makes elaborate provisions on enforcement mechanisms and also creates specific offences and punishments. Section 36(11) of the Constitution of the Federal Republic of Nigeria, 1999 (as amended) and the famous case of Aoko v Fagbemi (1961), I All N.L.R. 400 remain valid bases for the principle that no one can be punished for an offence unless the offence and its attendant penalty are spelt out in the law.

The ambiguities on “net profit” and companies liable to the levy worsen the enforcement obstacles in the case of this levy. As highlighted earlier, the Police Trust Fund Act sets no parameters for determining the “net profit” of the company upon which the 0.05% would be computed; neither does it stipulate when the levy would be due and payable. In comparison, Companies Income Tax becomes due and payable after laid down preliminaries under CITA. Even when the tax is so due and payable, FIRS must still resort to statutory procedures in moving against a company that fails to comply voluntarily.


Added to the financial burden posed by taxes and levies on individuals and businesses in Nigeria is the equally onerous task of unravelling ambiguities of the enabling laws. The enabling law of the Police Trust Fund Levy is yet another statutory haze around Nigerian taxes and levies. By judicial standpoint, a revenue law, in order to yield revenue, must be explicit and precise on the liability it intends to impose. Hence, it is trite that ambiguities in taxing legislations are resolved in favour of the taxpayer. In Authority v. Regional Tax Board (1970) NCLR 276 at 286, Lewis JSC did not mince words to state that: “No tax can be imposed on the subject without words in an Act of Parliament clearly showing an intention to lay a burden on him.”

Judicial treatment of the ambiguities encircling the Police Trust Fund Levy will unfold with time.



Dr. Jerome Okoro is a seasoned tax practitioner and the senior partner in charge of Litigation, Tax and Energy Law at Hermon Legal Practitioners. He can be reached by email on

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