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11 August 2023

How Tax Refund Can Arise in Nigeria

What is Tax Refund

‘Simply, it means tax paid to a taxpayer: it is repayment of excess tax payment or credit in respect of taxes…’ Dr. Teju Somorin.

Refund recovery arises when tax assessed by the tax authority is greater than tax already remitted by the tax payer; the difference is called additional tax.

From the taxpayer’s perspective refund takes place when the tax already paid is higher than the tax he ordinarily would have paid after complying with the relevant tax provisions.

Refund generally can occur in two ways as described above, however when the refund is to the advantage of the tax authority it is termed tax recovery. When it is to the advantage of the taxpayer it is termed refund.

Circumstances that can trigger Tax Refund in Nigeria

Tax refund could arise in any of the following circumstances:

  1. Outright overpayment of taxes done in error
  2. Genuine error in tax computation
  3. Double remittance by collecting banks
  4. Double payment of the same tax type
  5. Input VAT in excess of output VAT
  6. VAT deducted at source without corresponding adjustment for input VAT
  7. WHT deducted at source higher than the tax profile of the company
  8. Input VAT claims by zero rated taxable persons
  9. Wrong remittance by banks, MDAs and taxpayer
  10. Payment meant for other agencies
  11. Payment meant for other tax authorities
  12. Stamp duties paid in respect of incorporation of new company but which registration was discontinued.

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