Nigeria tax: Lagos introduces Hotel Occupancy and Restaurant Consumption Tax Law

The Lagos state governor signed a law on 22 June 2009 that imposes a 5% tax on goods and services consumed in hotels, restaurants and event centers within the state and vested the power of administration (assessment and collection) with the Lagos State lnland Revenue Service (LIRS). The tax base is the total cost of facilities, consumable or personal services supplied to a consumer in, by or on behalf of the hotel, restaurant or event center, excluding value added tax (also levied at 5%). The law became effective on 1 August 2009.

Hotels, restaurants and other businesses affected by the Hotel Occupancy and Restaurant Consumption Tax Law are required to register with the LIRS within 30 days of the law entering into effect or upon the commencement of business, whichever is earlier.

Persons owning, managing or controlling a business, or supplying goods or services chargeable under the law (e.g. hotel owners/managers, etc.), are collecting agents on behalf of the LIRS and are required to remit amounts collected on or before the 20th day of each calendar month. The tax filing must be accompanied by a report stating:
- The total amount of payments made for all chargeable transactions during the preceding reporting period;
- The amount of tax collected by the agent during the reporting period; and
- Any other information required by the LIRS to be included in the report.

Collecting agents are required to maintain and preserve records, books and accounts in respect of all transactions chargeable under the law. Where a collecting agent fails to file a return or make remittances when due, the LIRS may make an estimate of the total amount due and that estimate will become due not later than 21 days from service of such a notice. Further the failure to remit the tax collected within the stipulated time will attract interest at a rate of 5% per annum above the prevailing Central Bank of Nigeria minimum rediscount rate as determined at the time of actual remittance, as well as a penalty equal to 10% of the amount of tax due. Persons convicted under the law may be liable to imprisonment for up to two years or a fine of up to NGN 2 million, or both.

As from the effective date of the law, the Lagos Sales Tax will not apply to a transaction or facility covered by the Hotel Occupancy and Restaurant Consumption Tax Law. It should be noted that, although the legality of the Sales Tax Law has been challenged and is not currently being enforced, this new legislation effectively reintroduces the Sales Tax for this sector under a new heading.