President Muhammadu Buhari, on Monday 26 March 2018, signed the instrument of ratification of agreement with Singapore against double taxation and fiscal evasion. The President’s assent is pursuant to the approval of the double taxation treaty (DTT) between Nigeria and Singapore on 16 November 2016 by the Federal Executive Council (FEC) and subsequent signature of the DTT by the Federal Government of Nigeria on 2 August 2017.
The President’s assent of the DTT has however brought to the fore, issues surrounding the treaty making process in Nigeria. Given that there has not been any public notice of ratification of the DTT by the National Assembly since it was signed in 2017, it is unclear whether the President’s assent implies that the DTT between Nigeria and Singapore has now become effective or if it is merely a formalization of the signing of the DTT in 2017.
Based on the above, it is pertinent to examine the treaty making process vis-à-vis the applicable legislation in order to clarify when a DTT becomes effective and operational in Nigeria.
Justification for Treaties
A treaty, as defined under the Treaties (Making Procedure, etc.) Act means “instruments whereby an obligation under international law is undertaken between the Federation and any other country and includes “conventions”, “Act”, “general acts”, “protocols”, “agreements” and “modi-vivendi”[1], whether they are bilateral or multi-lateral in nature”.
The need for treaties continues to increase due to globalization, continuing technological innovation and other factors that have increased interdependence of countries on one another. For instance, where a country acting alone is unable to address a problem, such problem can be adequately addressed by acting cooperatively at the international level for such country to protect its own interests.
DTTs, in particular, are aimed at eliminating or providing relief for double taxation on the income of companies and individuals that are liable to tax in both countries. DTTs also seek to prevent fiscal evasion with respect to taxes on income and capital gains whilst also improving the trade relations between countries of reference.
In general, the provisions of tax treaties or any other treaty (where effective) supersedes the provisions of domestic law in the event of a conflict. Consequently, countries entering into bilateral tax treaty negotiations typically examine cautiously the applicable provisions of their domestic tax laws and assess the consequences of applying the treaty.
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