Court Dismisses Shell’s Tertiary Education Tax Suits Against NRS

A Federal High Court in Lagos has dismissed a suit filed by Shell Nigeria Oil Products Limited and four others, challenging the application of a 3% Tertiary Education Tax (TET) rate by the Nigerian Revenue Service (NRS) to their 2023 profits.

Justice Daniel Osiagor held that FIRS acted lawfully in applying the 3 per cent rate for the year ending 31st December, 2023.

The case was marked as FHC/L/CS/2340/2024 while other suits were filed by Shell Nigeria Closed Pension Fund Administrator Limited, Shell Nigeria Business Operation Limited, Shell Nigeria Gas Limited, and Shell Exploration and Production Africa Limited.

The plaintiffs had argued in the suits that FIRS wrongly applied the increased 3 per cent rate retroactively to income earned from 1 January to 31 August 2023.

They also submitted that, under the Finance Act (Effective Date Variation) Order, 2023, the new rate was effective only from 1 September 2023, and income earned before that date should be taxed at the previous 2.5 per cent rate.

Furthermore, they sought declarations, including a refund of N4,270,544, which they claimed was excess tax paid after the FIRS’s TaxPro Max platform calculated their 2023 liability at 3 per cent.

Alternatively, they asked for this amount to be credited toward future tax obligations.

However, FIRS, in its counter-affidavit, argued that the Tertiary Education Tax is an annual tax assessed on a company’s full accounting period, from 1 January to 31 December, and that Nigerian law does not allow splitting the year into segments for different tax rates.

Justice Osiagor agreed, ruling that TET is an annual tax based on assessable profits for a full year and that there is no legal basis for dividing a single year into parts for different rates.

The judge also held that no vested rights had been gained by the plaintiffs before the end of 2023, so applying the 3 per cent rate was not retroactive taxation.

The court dismissed all five suits and upheld the FIRS’s assessment in full.