Waiver or refund of liability or expenses

In the business world, it is possible for an expense/liability already allowed for tax purposes to be refunded/waived either partly or in whole. Section 28 of the Companies Income Tax Act Cap C21 LFN 2004 (as amended) and Section 22 of the Personal Income Tax Act Cap P8 LFN 2004 (as amended) provide that, such refund or waiver shall be deemed a profit to the company on the day such refund or waiver was given. In the words of CITA:

When a deduction has been allowed to a company under the provisions of section 24 or 25 of this Act in respect of any liability of, or any expense incurred by that company and such liability is waived or released or such expense is refunded to the company, in whole or in part, then the amount of that liability or expense which is waived, released or refunded, as the case may be, shall be deemed to be profits of the company on the day on which such waiver, release or refund was made or given. The provision of Section 22 of PITA is not materially different from that of CITA.

Sections 24 and 25 of the Act provide for deductions allowed and deductible donations.


In 2018, XYZ Limited recorded an interest expense of N1, 500, 000 which was due for payment but yet to be paid as at end of the financial year; 31st December, 2018. The loan was obtained for business purpose. In February 2019, due to the long standing business relationship between the lender and the company, the lender waived 50% of the interest expense.

For the purpose of income tax, the sum of N750, 000 (50% waived interest) shall be reported as an income in 2019 financial year.

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