President Muhammadu Buhari recently signed into law the Nigeria Police Trust Fund (Establishment) Act, 2019 (the “Act”). The Act established a special intervention fund for the Nigeria Police Force, the Nigeria Police Trust Fund (the “Trust Fund”). The operative period of the Trust Fund is 6 (six) years from the commencement of the Act, although the National Assembly may extend the Trust Fund’s operative period.
Contributions to the Trust Fund are to be utilized for, inter alia, the training and retraining of personnel of the Nigeria Police Force and its auxiliary staff, construction of police stations, provision of living facilities and the provision of state-of-the-art security equipment.
In addition to contributions from the Federation Account (0.5% of the total revenue accruing to the Federation Account); take-off grants and special intervention funds from the Federal, State and Local Governments; aids, grants, donations and assistance from international agencies, non-governmental organizations and the private sector, “companies operating business in Nigeria” are also required to contribute a levy of 0.005% of their net profit to the Trust Fund. The Act therefore introduces a ‘police tax’ of 0.005% of net profit to be paid by all companies operating in Nigeria.
A close look at the language used by the drafters of the Act - “companies operating business in Nigeria” - suggests that the obligation to contribute 0.005% of their net profit is not restricted to companies ‘incorporated’ in Nigeria but extends to all companies, both locally incorporated companies and non-resident companies (companies incorporated outside Nigeria), that are carrying on business in Nigeria. For a locally incorporated company, the levy of 0.005% will presumably be on its global profit, while for a non-resident company, the levy will presumably be based on the profit derived from its Nigerian operations. It is yet to be confirmed if indeed the levy will apply to non-resident companies.
Although the objectives behind the establishment of the Trust Fund are laudable given the need to improve the effectiveness of the Nigeria Police Force in order to ensure the safety of lives and properties, the efficient enforcement of the Act, and transparency and effectual utilization of contributions to the Trust Fund will determine whether the stated objectives are achieved.
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