On 5 May 2025, the Federal High Court, Lagos Division, affirmed a Tax Appeal Tribunal decision that set aside administrative penalties the Federal Inland Revenue Service (FIRS) had imposed on Checkpoint Software Technologies B.V Nigeria Ltd.
The Court found two problems with the Country-by-Country Reporting (CbCR) Regulations 2018. First, the FIRS had no legal authority to issue them without a duly constituted Board, as the FIRS Establishment Act requires. Second, the Regulations were unconstitutional. They rested on the OECD Multilateral Competent Authority Agreement, which the National Assembly never domesticated under Section 12 of the 1999 Constitution (as amended).
Why country-by-country reporting mattered
The FIRS issued the CbCR Regulations on 1 January 2018. Their main purpose was to make multinational enterprises give tax authorities information on their global activities, profits and taxes.
Consequently, nullifying them has far-reaching effects for local and foreign companies with cross-border activity, especially those with multinational structures. The key points follow.
Legal Basis for the Decision
Lack of a valid FIRS Board
When the FIRS issued the CbCR Regulations, its Board was not properly constituted. The Court held that this removed the FIRS’s authority to make them. The Regulations were therefore ultra vires and of no legal effect.
Excessive Penalties
The Court also found the penalties under the Regulations disproportionate. They were inconsistent with the enabling legislation, specifically the FIRS Establishment Act. As a result, the Court declared them null and void.
Breach of the 1999 Constitution
The Regulations relied on the OECD’s Multilateral Competent Authority Agreement (MCAA). However, Nigeria’s National Assembly had not domesticated it. The Court therefore ruled that the Regulations breached Section 12 of the 1999 Constitution.
Implications of the Decision for Taxpayers
Relief from country-by-country reporting penalties
Organisations fined under the CbCR Regulations may now have grounds to challenge those penalties, or to seek refunds or reversals.
Potential Appeal
It remains unclear whether the FIRS will appeal. In the meantime, the CbCR Regulations and their penalties remain invalid and unenforceable.
Conclusion
The decision underlines that regulators must comply with the Constitution when they make rules. For multinational enterprises in Nigeria, it offers relief from country-by-country reporting, but it does not remove the need for compliance readiness.
Companies should take expert advice to manage risk and prepare for future regulatory change. Our analyses of taxing non-resident companies and our Q3 2025 Tax Newsletter cover related developments.
For more information, kindly contact us at tax@olaniwunajayi.net