Because Nigerians are well recognized for their charity and generosity, it is usual in Nigeria for people to give gifts in cash or items valued at money as well as special favors, prizes, or assistance to friends, family members, or close associates. In Nigeria, neither the giver nor the recipient or donee ever considers the tax repercussions of their generosity and acts of kindness.
The question at hand is whether a business can use its assets to make gratuitous payments. Many individuals believe that a firm must sponsor events, promotions, programs, and the like.… in essence, companies (or their top managers) are expected to “drop something”. But are these donations and gifts subject to any legal restrictions? The ramifications of such gifting are frequently top priorities in other countries, and they are carefully studied before the gifting agreements are implemented. However, in Nigeria, few individuals are concerned with the tax ramifications of a gift made or received.
Like the tax laws of several other countries, those of Nigeria lack an explicit definition of a gift. As a result, gifts will be defined or described in accordance with judicial and regulatory standards. According to Black’s Law Dictionary, a gift is;
“a voluntary conveyance of land, or transfer of goods, from one person to another, made gratuitously, and not upon any consideration of blood or money… an uncompensated voluntary transfer of personal property. An owner parting with property for no monetary consideration.[1]”.
The United States Internal Revenue Service defines gifts as “any transfer to an individual, either directly or indirectly, where full consideration (measured in money or money’s worth) is not received in return”[2].
In practice, it could be difficult to draw a line between corporate gifts and fraud (or Tax Avoidance), however, the legal considerations bother around the following questions:
– Is it reasonably incidental to the object of the company?
– Is it bona fide?
– Is it done for the benefit and to promote the prosperity of the company?
Where the answer to the above is no, then the gift is legally improper.
In essence, you must show how that the charity is in the interest of the company and how it advances the objects for which the company was established.
Should political donations be allowed or prohibited or at least controlled?
Large companies attempt to contribute to the government and other political causes. This might make them more popular with the political party and even give them the power to direct the State’s governance. You would owe someone anything if they made a significant contribution to your achievement and you chose to reward them. In the same way, it seems to reason that the State should owe a corporation or individual some sort of reciprocal responsibility if they make significant contributions to a governor’s campaign finances or the accounts of the State. No association, other than a political party, is permitted to canvass for votes for any candidate in any election or contribute to the funds of any political party or to the election expenditures of any candidate in Nigeria, according to Section 221 of the 1999 Constitution. The term “association” is defined under Section 229 to encompass unincorporated entities. The Electoral Act and the Companies and Allied Matters Act both contain a comparable clause. Nevertheless, Nigeria lacks enforcement.
Isochukwu Michael
[1] https://thelawdictionary.org/gift/
[2] https://www.irs.gov/businesses/small-businesses-self-employed/frequently-asked-questions-on-gift-taxes.
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Social & Political factors influencing business