Court Dismisses Shell’s Tertiary Education Tax Suits Against FIRS

A Federal High Court, Lagos, has dismissed suit filed by Shell Nigeria Oil Products Limited and its four sister companies, challenging the Federal Inland Revenue Services (FIRS) application of a 3 percent Tertiary Education Tax (TET) rate to its 2023 financial year profits.

In dismissing the suits in its entirety, Justice Daniel Osiagor, who presided over the court held that the FIRS acted lawfully in assessing the company at the 3 percent rate for the accounting period ending December 31, 2023.

Shell Nigeria Oil Products Limited suit was marked FHC/L/CS/2340/2024, while others suits were: Shell Nigeria Closed Pension Fund Administrator Limited-
FHC/L/CS/2342/24: Shell Nigeria Business Operation Limited- FHC/L/CS/2339/24; Shell Nigeria Gas Limited-FHC/L/CS/2338/24, and Shell Exploration and Production Africa Limited-FHC/L/CS/2341/24.

The plaintiffs, had approached the court through their originating summons filed in December 2024, filed by their lawyers, Adedapo Tunde Olowu (SAN) and Esther Siyaidon, have contended that the FIRS wrongly applied the increased 3 percent TET rate retroactively to income earned between January 1 and August 31, 2023.

They have also argued that under the Finance Act (Effective Date Variation) Order, 2023, the new rate only took effect from September 1, 2023, and that income earned before that date should be taxed at the previous 2.5 percent rate.

The plaintiffs have separately in their suits sought several declarations, including ‘a refund of N4,270,544, which it described as excess tax paid after the FIRS’ TaxPro Max platform computed its entire 2023 liability at 3 percent.

In the alternative, they prayed that the amount be credited against future tax obligations.

However, the FIRS through its lawyers, Bolanle Oniyangi and Moses Ideho, maintained that Tertiary Education Tax is an annual tax assessed on a company’s full accounting period, which runs from January 1 to December 31.

FIRS also argued that Nigerian tax law does not recognize the proration or fragmentation of an accounting year for the purpose of applying different tax rates.

In his judgment, Justice Osiagor agreed with the FIRS, holding that TET is an annual tax computed on assessable profits for a complete accounting period. The court ruled that there is no statutory basis for dividing a single accounting year into segments for differential tax treatment.

The judge further held that no vested right accrued to the plaintiff before the end of the 2023 accounting year, and therefore the application of the 3 percent rate did not amount to retroactive taxation.

Justice Osiagor consequently dismissed the five suits in its entirety, while affirmed FIRS’ assessment.