1 Legislative framework

1.1 Which legislative provisions govern private client matters in your jurisdiction?

  • The Finance Act, 2021;
  • The Companies and Allied Matters Act, 2020;
  • The Nigeria Data Protection Regulation, 2019;
  • The Investments and Securities Act, 2007;
  • The National Information Technology Development Agency Act, 2007;
  • The Nigerian Deposit Insurance Corporation Act, 2006;
  • The National Office of Technology Acquisition and Promotion Act, 2004;
  • The Nigerian Investment Promotion Commission Act, 2004;
  • The Foreign Exchange (Monitoring & Miscellaneous Provisions) Act, 2004;
  • The Wills Act, 1837 – as amended by the Wills Amendment Act of 1852 (including the wills laws of various states); and
  • The administration of estate laws of various states.

1.2 Do any special regimes apply to specific individuals (eg, foreign nationals; temporary residents)?

Special regimes regulate the activities of specific individuals. Such regimes are encapsulated in laws such as:

  • the Nigerian Investment Promotion Commission Act, 1995; and
  • the Foreign Exchange (Monitoring & Miscellaneous Provisions) Act, 1995.

1.3 Which bilateral, multilateral and supranational instruments in effect in your jurisdiction are of relevance in the private client sphere?

The Convention on Mutual Administrative Assistance in Tax Matters, as amended, which was ratified on 29 May 2015.

2 Taxation

2.1 On what basis are individuals subject to tax in your jurisdiction (eg, residence/domicile/nationality)? How is this determined?

Tax is levied on every individual, whether resident or non-resident, who is engaged in paid employment or business. Generally, these include persons whose income is generated in Nigeria, as well as companies that operate in Nigeria. Significantly, it is an important source of cost settlement for the government. Hence, the main function of tax in Nigeria, as in other countries, is to generate revenue to cover government costs at all levels and provide infrastructure to the public. In order for the government to meet its statutory obligation to promote the economic development of Nigeria, an effective taxation drive is required, whereby every individual and company complies efficiently with the tax administration, and with tax regulations and system reforms.

The administration of tax in Nigeria is vested in the three tiers of government. The Federal Inland Revenue Service is responsible for taxes payable to the federal government; while those payable to the state governments are administered by the state boards of internal revenue of the 36 states of the federation. Local governments also set rates and levies payable to them through their various councils.

The taxes payable by persons doing business in Nigeria include:

  • companies income tax;
  • personal income tax;
  • capital gains tax;
  • value added tax (VAT);
  • education tax;
  • technology tax;
  • stamp duties; and
  • withholding tax.

Failure to deduct and remit tax or to pay taxes of any kind will attract punitive fines and penalties.

2.2 When does the personal tax year start and end in your jurisdiction?

In Nigeria, the personal tax year is the fiscal year, which runs from 1 January to 31 December.

2.3 With regard to income: (a) What taxes are levied and what are the applicable rates? (b) How is the taxable base determined? (c) What are the relevant tax return requirements? and (d) What exemptions, deductions and other forms of relief are available?

(a) What taxes are levied and what are the applicable rates?

Income tax is payable on income from all sources, including balancing charges, minus allowable deductions for expenses, capital allowances and losses.

The taxes in Nigeria include:

  • companies income tax;
  • personal income tax;
  • capital gains tax;
  • VAT;
  • education tax;
  • technology tax;
  • stamp duties; and
  • withholding tax.

Nigeria adopts a pay-as-you-earn (PAYE) system to calculate the personal income tax of employees, which is called PAYE tax. The tax rate ranges from 7% to 24% of taxable income.

(b) How is the taxable base determined?

If an employee is tax resident in Nigeria, income tax will be payable on his or her worldwide income. ‘Worldwide income' refers to income received within and outside Nigeria. The Personal Income Tax Act provides that in determining the taxable income, the following types of income are chargeable to tax:

  • gains and profits from any trade, business, profession or vocation, for whatever period, as long as a trade, business, profession or vocation has been carried on or exercised;
  • any salary, wages, fees, allowances or other gains or profits from employment, including compensation, bonuses, premiums, benefits and other perquisites allowed, given or granted by any person to any temporary or permanent employee, other than any sums or expenses incurred by him or her in the performance of his or her duties, and from which it is not intended that the employee should make any profit or gain;
  • gains and profits, including any premium, arising from a right granted to any other person for the use or occupation of any property;
  • dividends, interest and discounts;
  • any pension, charge or annuity; and
  • any profit or other payment not failing within the above.

(c) What are the relevant tax return requirements?

An employer is mandated to deduct monthly PAYE tax from employees' salaries and remit the tax to the relevant tax authority through designated banks. The due date is within the first 10 days of the following month. There are also two annual PAYE tax returns that an employer should file on behalf of an employee. There are designated forms (Form H1 and Form G), otherwise known as annual employer's tax return. They show the employee's name, gross income per annum and PAYE taxes in the preceding tax year. Self-employed individuals must file a return of income earned in the preceding year and pay the requisite personal income tax to the relevant tax authority for direct assessment.

(d) What exemptions, deductions and other forms of relief are available?

Deductions for tax purposes are granted if the expenses meet the criteria for allowable deductions. These include expenses incurred wholly, exclusively, necessarily and reasonably in the production of taxable income, such as charitable contributions, employment expenses and so on.

2.4 With regard to capital gains: (a) What taxes are levied and what are the applicable rates? (b) How is the taxable base determined? (c) What are the relevant tax return requirements? and (d) What exemptions, deductions and other forms of relief are available?

(a) What taxes are levied and what are the applicable rates?

Capital gains tax is imposed at a rate of 10% on capital gains accruing from the disposal of any asset, whether corporeal or not.

(b) How is the taxable base determined?

Where assets located outside Nigeria (as defined in the Capital Gains Tax Act) are disposed of by a non-Nigerian company, capital gains tax is charged only in respect of that part of the gain which is brought into or received in Nigeria.

(c) What are the relevant tax return requirements?

The due date for the filing of tax returns and the payment of the tax is the same as for companies income tax. Therefore, the due date for the filing of tax returns and the payment of tax in respect of the chargeable assets is no later than 30 June and 31 December each year.

(d) What exemptions, deductions and other forms of relief are available?

Generally, gains on the disposal of stocks, shares and Nigerian government securities are exempt from capital gains tax. More so, transactions that are subject to income tax are usually excluded from the scope of capital gains tax. The Finance Act, 2020 exempts sums obtained by way of compensation for loss of office, up to a maximum of N10 million, from capital gains tax.

2.5 With regard to inheritances: (a) What taxes are levied and what are the applicable rates? (b) How is the taxable base determined? (c) What are the relevant tax return requirements? and (d) What exemptions, deductions and other forms of relief are available?

(a) What taxes are levied and what are the applicable rates?

The Personal Income Tax Act imposes personal income tax on individuals, communities, families and the trustees of an estate. It provides that the income of an individual, a trustee or executor of a deceased person is ascertained in accordance with its Second Schedule, according to which income tax is charged on any payment or benefit to a beneficiary out of a settlement, trust or estate. In Lagos State, an estate fee (inheritance tax) of 10% must be paid to the state government when the probate application is approved.

(b) How is the taxable base determined?

Generally, no tax is payable if property is received as part of an inheritance. However, if that property is subsequently sold or disposed of, capital gains tax may be payable. In Nigeria, there is an estate or inheritance tax of 10% of the value of the estate of a deceased person. The Personal Income Tax Act, as amended in 2011, imposes personal income tax on individuals, communities, families and the trustees of an estate. The taxable base for inheritance is determined by its fair market value – that is, the price that the property would command in the marketplace in the case of an informed buyer and seller and where a reasonable period of time is allowed for the transaction.

(c) What are the relevant tax return requirements?

An individual is not required to report an inheritance on his or her state or federal income tax return, because an inheritance is not regarded as taxable income. However, the type of property that is inherited might come with some built-in income tax consequences.

(d) What exemptions, deductions and other forms of relief are available?

Even in states that tax inheritances, family members are generally spared from tax, as are relatively small inheritances. Surviving spouses are exempt from inheritance tax.

2.6 With regard to investment income: (a) What taxes are levied and what are the applicable rates? (b) How is the taxable base determined? (c) What are the relevant tax return requirements? and (d) What exemptions, deductions and other forms of relief are available?

(a) What taxes are levied and what are the applicable rates?

The taxation of investment income depends on the type of investment (eg, tax exempt, ordinary, capital gain or tax deferred). Not all investments are taxable. Investment income is generated by either:

  • the income it produces during the ownership of the investment (eg, interest, dividends or rent); or
  • the gain it produces when the investment is sold at an appreciated value.

(b) How is the taxable base determined?

Investment income such as interest and rent is considered ordinary income and will generally be taxed at the ordinary income tax rate. Investment income from the sale of a capital asset that is held for more than one year (eg, stock or investment property) is generally considered a capital gain and taxed at long-term capital gains rates. Qualifying dividends are also taxed at long-term capital gains rates.

However, investment income derived from Nigeria by a person who is resident outside the country is liable only to withholding tax.

(c) What are the relevant tax return requirements?

Long-term capital gains and qualified dividends are generally taxed at special capital gains tax rates of 0%, 15% and 20%, depending on the individual's taxable income (some types of capital gains may be taxed at rates as high as 25% or 28%).

(d) What exemptions, deductions and other forms of relief are available?

Nigeria has various tax incentives designed to encourage investment in key sectors of the economy and reduce the cost of doing business. Tax-based incentives are covered under different laws and in different forms (eg, reliefs, credits, exemptions, allowances, breaks/holidays, drawbacks). The government also provides fiscal concessions through its annual fiscal policy. Franked investment income is excluded for the purpose of the minimum tax computation – a flat rate of 0.5% of turnover, which applies to companies with no total profit or whose computed tax is less than the minimum tax.

2.7 With regard to real estate: (a) What taxes are levied and what are the applicable rates? (b) How is the taxable base determined? (c) What are the relevant tax return requirements? and (d) What exemptions, deductions and other forms of relief are available?

(a) What taxes are levied and what are the applicable rates?

The Finance Act, 2019 provides for the taxation of real estate in Nigeria, with complementary tax incentives. The taxes levied on real estate transactions are:

  • companies income tax;
  • personal income tax;
  • value added tax;
  • capital gains tax;
  • stamp duties;
  • education tax;
  • withholding tax; and
  • state property taxes.

Different states impose certain taxes, charges and fees for the registration of property. For instance, under the Lagos State Land Use Charge Law, the land use charge is paid annually by property owners in Lagos. As the name implies, this charge takes the form of a tenement rate which the landowner pays to the government for granting him or her a ‘lease' over the land, since by law the state government owns all the land in the state.

(b) How is the taxable base determined?

The property tax charges and fees vary from state to state. The property tax amount is calculated based on the residential area and thus varies from one property type to another.

(c) What are the relevant tax return requirements?

Different requirements apply for particular taxes.

(d) What exemptions, deductions and other forms of relief are available?

The tax incentives available for real estate under the Finance Act include the following.

Exemption from companies income tax: The Finance Act provides that dividends and rental income received by a real estate income company (REIC) on behalf of its shareholders is exempt from companies income tax, provided that at least 75% of the dividend or rent earned is distributed within 12 months of the end of the financial year in which the income is earned (Section 23(1)(s) of the Companies Income Tax Act). However, where the REIC fails to distribute the dividend or rental income within the stipulated 12-month period, the income will be subject to companies income tax. This provision grants tax-exempt status to real estate and its fulfilment is a critical requirement for tax transparency. However, management fees, profits and other income earned by or with regard to real estate will be subject to companies income tax (Section 23(1B)(b) of the Companies Income Tax Act).

Deductibility of dividends or mandatory distributions made by REICs: The Finance Act also allows for dividends or mandatory distributions made by a Securities and Exchange Commission-approved REICs to their shareholders to be taken as allowable deductions for companies income tax purposes (Section 24(k) of the Companies Income Tax Act). It would appear that this provision acts as a counter-check to ensure that only REICs that pay dividends and other mandatory distributions enjoy the tax exemption under Section 23. In essence, where a REIC fails to make distributions in a given year, it cannot avail of the tax exemption provisions, as it will not be entitled to make deductions as required under Section 24(k). Essentially, where a REIC fails to pay dividends and other mandatory distributions to its shareholders, and by extension fails to take the deductions, the undistributed sum will be subject to tax accordingly.

Other exemptions: These include:

  • exemption from excess dividend tax provision; and
  • exemption of dividends and distributions to REICs from withholding tax.

2.8 With regard to any other direct taxes levied in your jurisdiction: (a) What taxes are levied and what are the applicable rates? (b) How is the taxable base determined? (c) What are the relevant tax return requirements? and (d) What exemptions, deductions and other forms of relief are available?

(a) What are they and what are the applicable rates?

Direct taxes are levied on the intended individual taxpayer. They include taxes which are assessed on the property, person, business, income and so on of the individual taxpayer. Examples include personal income tax, capital gains tax and companies income tax.

(b) How is the taxable base determined?

The taxable base for direct tax is determined based on factors such as the status of the taxpayer, his or her income and the value of the transaction. Direct tax is paid directly to the entity that imposed it. Direct taxes are imposed on the individual and the burden of payment cannot be transferred to another person or entity

(c) What are the relevant tax return requirements?

Different requirements apply for particular taxes.

(d) What exemptions, deductions and other forms of relief are available?

Different requirements apply for particular taxes.

2.9 With regard to any indirect taxes levied in your jurisdiction: (a) What taxes are levied and what are the applicable rates? (b) How is the taxable base determined? (c) What are the relevant tax return requirements? and (d) What exemptions, deductions and other forms of relief are available?

(a) What are they and what are the applicable rates?

Indirect taxes are levied on one party in the expectation that it will indemnify itself at the expense of another. In other words, indirect taxes are those which are imposed on commodities before they reach the consumer and are paid by those on whom they ultimately fall, not as taxes but as part of the market price of the commodity. Examples include VAT, stamp duty, excise duty, customs duty and sales or purchase tax. Indirect taxes may affect the cost of living, as they are borne by the consumers of such goods. A good example was the failed attempt by the federal government to increase the VAT rate to 10%.

(b) How is the taxable base determined?

Generally, indirect taxes are determined according to the value of the transaction.

(c) What are the relevant tax return requirements?

Different requirements apply for particular taxes.

(d) What exemptions, deductions and other forms of relief are available?

According to the Finance Act, some goods are exempt from VAT. Examples include:

  • commercial aircraft, commercial aircraft engines, commercial aircraft spare parts and services airline transportation tickets issued and sold by commercial airlines registered in Nigeria; and
  • the hire, rental or lease of tractors, ploughs and other agricultural equipment.

3 Succession

3.1 What laws govern succession in your jurisdiction? Can succession be governed by the laws of another jurisdiction?

The law governing succession in Nigeria generally depends on whether it is testate or intestate succession. While testate succession is primarily governed by the Wills Act and the applicable wills laws of the various states, intestate succession is governed by the Administration of Estates Act/laws of the various states, as well as customary law. Other relevant instruments include:

  • the High Court Civil Procedure Rules of the various states;
  • the Evidence Act, 2011; and
  • case law.

3.2 How is any conflict of laws resolved?

Despite the significant potential for cultural conflict, the traditional practices of Nigerian society have been allowed to co-exist with other systems of law, provided that they meet the standard tests of repugnancy and incompatibility. For this reason, Section 22(1) of the High Court Law of Lagos State provides that: "the High Court shall observe and enforce the observance of every native law and custom which is applicable and is not repugnant to natural justice, equity, and good conscience, nor incompatible either directly or indirectly with any law for the time being in force, and nothing in this Act shall deprive any person of the benefit of any such native law or custom."

The proviso to Section 14(3) of the Evidence Act further provides as follows: "Provided that in case of any custom relied upon in any judicial proceeding it shall not be enforced as law if it is contrary to public policy and is not in accordance with natural justice, equity, and good conscience."

Where a traditional or customary practice can stand the prescribed tests, it will be upheld and applied to relevant facts. It is on this premise that customs are examined before application. The customary law of succession occupies a central position in the customs brought before the courts for interpretation and application, because it has a direct bearing on the lives of the people.

3.3 Do rules of forced heirship apply in your jurisdiction?

In certain circumstances a person cannot freely devolve his or her property as he or she would wish. Individuals who die and are domiciled in Nigeria enjoy the freedom of testamentary disposition and may leave their assets to whomever they wish. However, when an individual dies, certain categories of people may bring a claim under the Wills Act or the wills laws of the state for financial provision from the deceased's estate if they consider that insufficient financial provision has been made for them under either the terms of the deceased's will or the intestacy rules. Assets held by a deceased person under joint tenancy automatically pass to the surviving joint owner.

Testamentary freedom in Nigeria comes with certain limitations, which were introduced to prevent the testator from disinheriting dependants in favour of strangers, which could cause hardship to those dependants. The limitation under the Wills Act aims to provide for families and dependants who have been cut out of a will or to whom adequate provisions have not been made. Section 2(1) of the Wills Law of Lagos State provides as follows: "Notwithstanding the provision of section1 of this law, where a person dies and is survived by any of the following persons – (a) the wife or wives or husband of the deceased; and (b) a child or children of the deceased, that person or persons may apply to the court for an order on the ground that disposition of the deceased estate affected by his will is not such as to make reasonable financial provision for the applicant."

There are some differences between the provision for family and dependants under the law of Lagos State and under that of Kaduna, Abia and Oyo States. In the latter three states, the categories of persons who can apply for reasonable financial provision are extended to include parents, brothers and sisters of the deceased who, immediately before the death of the testator, were dependent on the deceased, either wholly or partly. Thus, even where such persons have not been included in the will of the deceased, the law will make provision for them if their claims meet moral and other obligations. There are also Islamic law limitations which apply to Muslims who are subject to Sharia law.

3.4 Do the rules of succession rules apply if the deceased is intestate?

The law of succession defines the applicable rules where a person dies without making a will (intestate). These rules specify the category of persons and percentage of property that will devolve to each person. If someone dies intestate, the issues to be considered include the law under which he or she was bound and thus under which his or her property will be shared. If someone who presented himself or herself as being bound by Islamic law at the point of death dies intestate, his or her property will be shared according to the rules of succession under Islamic law. This also goes someone who is married under the Marriage Act, which is a good indication that he or she has chosen to be bound by English law. In that case, the Wills Act or its state counterparts will apply if that person dies intestate. Customary law also makes provision for how the assets of a deceased person will be distributed in line with the personal law of the deceased.

3.5 Can the rules of succession be challenged? If so, how?

Generally, there are three types of grants of probate:

  • grant of probate with will (executors appointed in the will);
  • grant of probate without executors appointed (or where the executors have died or renounced probate), in which case the court will appoint administrators; and
  • grant of administration without will (deceased died intestate).

All of above could be either contentious or non-contentious.

A contentious grant is where the grant of probate or letters is contested or challenged by anyone who indicated his or her objection by filing a caveat. A person can challenge succession by questioning either the form or the substance of the will. Where the form of the will is in question, issues such as due execution, attestation and date are usually raised; and where the substance of the will is in question, issues such as testamentary capacity, undue influence and suspicious circumstance and limitation by law are raised.

In challenging the provisions contained in a will, family members and dependants may apply to court if adequate financial provisions are not made for them in the breadwinner's will. Section 2 of the Wills Law of Lagos State makes provision for family and dependents who are not provided for in a will.

Where someone is proven to be bound by customary law, such as Benin customary law, upon death, his or her property must devolve in accordance with Benin Rule (Igi Ogbe). If not, the devolution can be challenged and the court will overturn it. This also applies to other customary laws.

4 Wills and probate

4.1 What laws govern wills in your jurisdiction? Can a will be governed by the laws of another jurisdiction?

Wills are governed by the Wills Act, as well as the Wills Laws of the various states. In Nigeria, wills cannot be governed by the laws of another jurisdiction.

Generally, there are no uniform rules in Nigeria; however, there are similarities between the Wills Act and the wills laws of different states.

4.2 How is any conflict of laws resolved?

A conflict of laws is a conflict between the laws of two or more jurisdictions that are applicable to the dispute in question. The resolution of conflicts between English law and customary law, and between various customary laws, is left to the courts. The various high court laws contain provisions on the resolution of conflicts between customary law and received English law.

In resolving conflicts between English law and customary law, the status of the parties to the dispute is of fundamental importance. The different high court laws empower the courts to apply customary law and custom, and provide further that nothing contained therein shall deprive anyone of the benefit of customary law. Such law and custom must not be repugnant to natural justice, equity and good conscience, or incompatible with any local ordinance.

4.3 Are foreign wills recognised in your jurisdiction? If so, what process is followed in this regard?

Foreign wills are valid and recognised in Nigeria if they are executed in accordance with the laws of the country in which they are executed, or in which the testator was domiciled, habitually resident or a national at the time of his or her death. The will must meet all applicable requirements for validity. Generally, there are no legal requirements or guidelines for a will to be made; hence, regardless of whether it is governed by Nigerian law, as long as it is valid, this will suffice. The criteria for validity include the following:

  • The testator made the will voluntarily;
  • The testator was of sound mind at the time the will was made;
  • The will was witnessed at the time;
  • The will was duly signed by the testator; and
  • The testator had testamentary capacity.

All that is required for execution of a will is its registration at the probate registry of the jurisdiction in which it will be executed. Foreign wills will be admitted to probate if they are executed in accordance with the requirements for executing a will set out in Section 9 of the Wills Act (which is a statute of general application in Nigeria) and Section 4 of the Wills Law of Lagos State. Where a will has been read and probate obtained in a foreign country, the grant will be resealed. ‘Resealing' is a process by which a grant made in one state is sought to be recognised in another state (or country) where the deceased has property to be administered by the executors/administrators. See Section 2 of the Probates Resealing Act.

4.4 Beyond issues of succession discussed in question 3, are there any other limitations to testamentary freedom?

The limitations to testamentary freedom are classified as follows.

Customary law limitations: This restriction serves to restrict the property that can be disposed of by will. The proviso to Section 1(1) of the Wills Laws of Akwa Ibom and Lagos States gives rise to restrictions to testamentary freedom of disposition by giving weight to native law and custom. Depending on the language of the relevant wills law applicable in the state where the testator is domiciled at the time of death, every adult can make a will subject to entrenched native law and custom.

Islamic law limitation: Under the principles of Islamic law, a testator cannot dispose of more than one-third of his or her property by a will without the consent of his or her legal heirs (under Islamic law). This restriction is now subsumed under:

  • the Wills Law of Kaduna State;
  • the Wills Law of Oyo State;
  • the Plateau State Wills Edict;
  • the Bauchi State Wills Law;
  • the Kwara State Wills Law; and
  • the Jigawa State Wills Law.

Statutory limitation: The Inheritance Act gives the courts limited power to override the deceased's testamentary provisions by ordering provision to be made out of a man's estate for the maintenance of his widow and a limited category of other dependants (ie, infant sons, unmarried daughters and disabled adult sons or daughters). The act also provides for dependants if the will or intestacy fails to make such provisions for them, by allowing claims by close family members and by persons who were financially dependent on the deceased on death, including cohabitants.

4.5 What formal requirements must be observed when drafting a will?

In Ize-Iyamu v Alonge (2007) All FWLR (Pt 371) 1570 at 1587, the court held that in order for a will to be valid as to form:

  • it must be in writing;
  • it must be signed by the testator or his or her representative, and dated;
  • the signature of the testator must be witnessed by at least two witnesses;
  • the witnesses must attest and subscribe the will in the presence of the testator; and
  • the signature of the testator must be included at the end of the will.

Section 9 of the Wills Act and Section 4 of the Wills Law of Lagos State provide that every will must be in writing; thus, oral wills are invalid. However, under customary law, an oral will is valid. In Bankole v Tapo (1961) 1 All NLR 140, an oral disposition of land by a testator was upheld to be sufficient to transfer the property to the beneficiary.

4.6 What best practices should be observed when drafting a will to ensure its validity?

  • The full name and address of the testator must be included in writing;
  • The names and address of the executors who will take charge of the testator's assets and ensure that his or her wishes as expressed in the will are carried out must be included;
  • The full names and addresses of the beneficiaries must be included in the will; and where the beneficiaries are minors, the particulars of the guardian appointed to them;
  • A full list and particulars of the testator's assets, both real and personal, should be listed, together with details of how the assets should be shared among the beneficiaries; and
  • The names and addresses of witnesses to the will must be included.

4.7 Can a will be amended after the death of the testator?

A will can be amended only during the lifetime of a testator. This is done by drafting a codicil. A codicil is used to amend, change, rewrite or remove any information from a will. A will cannot be amended after the death of the testator.

4.8 How are wills challenged in your jurisdiction?

Wills can be challenged by contesting the will. Once the testator dies, his or her executors will submit an application to the registry for grant of probate. It is at this point that a caveat may be entered to prevent grant of the probate application. Once a caveat has been entered, it lasts for three months in Lagos State and six months in Abuja State. The person who enters a caveat must enter an appearance within eight days of service of citation on him or her. A citation is a warning to prove the will or disclose the nature of his or her interest that conflicts with the application for probate. The dispute will be resolved in court. On the conclusion of the proceeding, the registry may or may not grant probate, depending on the outcome of the proceeding.

4.9 What intestacy rules apply in your jurisdiction? Can these rules be challenged?

Where a person dies intestate, certain laws that govern the estate of that person will determine the distribution of his or her assets to the beneficiaries who are entitled to his or her estate. Generally, the form of marriage determines the applicable rules of intestacy succession. This can be classified under three headings:

  • marriage under the Marriage Act;
  • customary marriage; and
  • Islamic marriage.

Where the deceased was married under the Marriage Act, the Administration of Estates Law governs the estate of the deceased. Section 49(5) of the Administration of Estate Law states that any property which the deceased, who died intestate, might have disposed of by a will will be distributed in accordance with the provisions of that law, notwithstanding any customary law to the contrary. In Salubi v Nwariaku (2003), the court held that only the wife and children were entitled as beneficiaries of the deceased's estate. One other important issue decided in Obusez v Obusez (2007) concerned the estate succession of children born out of wedlock. The Supreme Court held that such children were legal beneficiaries and were therefore entitled to share in the estate of their father because Section 42(2) of the Constitution prohibits any form of discrimination by reason of the circumstances of birth. The same applies to customary and Islamic marriages. The rules on intestate succession under these headings will apply. This is usually personal law – that is, the law that the deceased desired to be ruled by, during his lifetime. A person married under native law and custom has a right of inheritance only to the extent allowed by custom. However, no custom in Nigeria allows a widow the right of inheritance. This notwithstanding, on numerous occasions the courts have established the right of a widow to a share of her husband's property upon his demise, despite this customary or Islamic position.

5 Trusts

5.1 What laws govern trusts or equivalent instruments in your jurisdiction? Can trusts be governed by the laws of another jurisdiction?

There is no specific statute governing private trust in Nigeria. The law of trust was part of the received English law in Nigeria, which comprised English common law, the doctrines of equity, cases and statutes of general application. Equity was developed by the lord chancellor in the Court of Chancery and aimed to mitigate the harshness of the common law. The development of equitable principles by the court of chancery also influenced the growth of the trust. Trusts are less frequently used in Nigeria than in England, due to social and cultural differences.

5.2 How is any conflict of laws resolved?

In Nigeria, the application of received English law is subject to:

  • the powers of the Nigerian courts to determine what the current law of England is; and
  • the duty of the Nigerian courts to apply English law only insofar as the limits of local jurisdiction and circumstances permit.

Hence, conflicts of laws are generally resolved in favour of Nigerian law.

5.3 What different types of structures are available and what are the advantages and disadvantages of each, from the private client perspective?

The classification of trusts can be a challenging task and will vary according to use or object. Hence, most names of trusts are reflective of their purpose or object. The main classification of trusts is as follows:

  • Private trust: A trust that is meant to benefit an individual or a group or people.
  • Public or charitable trust: A trust that is structured to benefit the general public or a section thereof. A charitable trust is always a public trust, but not all public trusts are charitable trusts.

Trusts can also be sub-categorised as:

  • express;
  • constructive;
  • implied;
  • resulting;
  • ministerial or instrumental; and
  • discretionary.

Irrespective of the classification of trusts into different classes, a key difference to note in the various classifications is between trusts that are created by act of the parties and those that evolve by virtue of the operation of law. The former are referred to as express trusts, while the latter are called implied trusts.

The advantages of trusts from a private client perspective are as follows:

  • A distinction is drawn between the formal or legal owner of property, the trustee and the beneficiaries.
  • The trustee remains independent and exercises full control over the trust property.
  • The trust concept often involves the transfer of ownership of property to a trustee.
  • Trust law imposes strict obligations and rules on trustees.

The disadvantages include the following:

  • their perceived irrevocability;
  • the loss of control over assets that are put into trust;
  • the cost of formation of trust and the transfer of assets;
  • the administrative requirements involved; and
  • the potential risk of future legislative changes.

5.4 Are foreign trusts recognised in your jurisdiction? If so, what process is followed in this regard?

The origin of the received law of trust in Nigeria lies primarily in the received common law of England, the doctrine of equity and the statutes of general application. Trusts and foreign judgments can thus be recognised and enforced in Nigeria.

5.5 How are trusts created and administered in your jurisdiction?

Generally, no formal requirements apply to the creation of a trust, as a result of the equitable nature of trusts. However, some formalities may be necessary for specific types of trust. In general, a valid trust is created by an individual when he or she executes a written declaration of trust directing one or more trustees to hold property or assets in accordance with the terms and conditions set out in the trust instrument for the benefit of one or more beneficiaries, who are equitable owners of the property or assets, while the legal interest is vested in the trustee.

It has been established that to create a valid trust, there must be:

  • certainty of intention;
  • certainty of subject matter; and
  • certainty of object.

5.6 What are the legal duties of trustees in your jurisdiction?

  • A duty to collect and safeguard the trust property;
  • A duty to distribute the trust property and maintain equality between the beneficiaries, except where a contrary intention is expressed by the settlor or testator in the trust deed;
  • A duty to invest the trust assets in order to yield income and ensure that the assets are not eroded, and to invest the trust fund as the trust investment or law may permit;
  • A duty not to delegate;
  • A duty to distribute trust property appropriately; and
  • A duty to act gratuitously.

5.7 What tax regime applies to trusts in your jurisdiction? What implications does this have for settlors, trustees and beneficiaries?

Personal income tax is imposed on income arising or due to a trustee from any settlements of trusts or estates, or to an executor of any estate of a deceased person in Nigeria. Taxable income comprises both Nigerian source income and income brought into or received in Nigeria. The tax is collected by the relevant tax authority of the state in which such settlement, trust or estate is located. In computing assessable income for tax purposes in relation to a trust, amounts apportioned to beneficiaries are deductible and treated as income to the beneficiaries. Any income not apportioned to the beneficiaries will be apportioned to the trustee or executor for assessment in his or her name as trustee of the settlement or trust. However, in the case of an inter vivos trust, where income is paid to an infant child of the settlor, who is also unmarried, the income will be deemed to be that of the settlor and not the beneficiary. The settlor is entitled to recover any income tax charged by reason of this provision from the trustee.

A fiduciary of a foreign trust in Nigeria will be liable to pay personal income tax on the global income of the trust. The beneficiaries of a foreign trust are also liable for personal income tax on income brought into Nigeria. However, the trustees and beneficiaries are entitled to a tax credit against the tax payable for income brought into Nigeria, provided that the income is brought into Nigeria through approved government channels. The tax credit cannot exceed the proportion of the income derived from outside Nigeria and brought into the country.

The trustees will not be liable for tax where all income of the trust is apportioned to the beneficiaries. However, any income not apportioned to the beneficiaries will be apportioned to the trustee or executor for assessment as the trustee of the settlement or trust.

5.8 What reporting requirements apply to trusts in your jurisdiction?

One of the duties of trustees in Nigeria is to render accounts and provide such information on the trust property as may be required by the beneficiaries. This is seen as a sacred duty, as the trustees are generally tasked with the onerous duty of safeguarding, managing, maintaining and administration of the trust, among other things. Hence, accountability is a key duty and the trustee must render such accounts as may be required.

5.9 What best practices should be observed in relation to the creation and administration of trusts?

The law of trusts can be complex. Before deciding to establish a trust, it is important to seek professional, jurisdiction-specific advice from those with experience and expertise in the field. When drafted appropriately, trusts can be powerful estate and tax planning tools. A lawyer is not needed to create a trust agreement. However, if there are problems with a trust, these may not become apparent until after the settlor has died – at which point it is too late to make changes. It is absolutely imperative that if you are considering a trust, you engage people who specialise in trust work (ie, spend at least 75% of their time practising in this area). A mediation/arbitration clause can help keep the trust's affairs out of the courtroom and a no-contest clause can help keep troublemakers from causing mischief.

6 Trends and predictions

6.1 How would you describe the current private client landscape and prevailing trends in your jurisdiction? Are any new developments anticipated in the next 12 months, including any proposed legislative reforms?

The private client landscape in Nigeria is an evolving one. While some areas – such as taxation – are fast moving and reflect current realities, other areas – such as trusts and succession – are still governed by obsolete laws which do not necessarily address the concerns that arise or may arise in today's modern society.

The Finance Act has transformed the private client landscape, in particular as it relates to taxation. It is expected that developments in this area will continue as the regulatory body issues guidelines and regulations from time to time in order to address various matters and concerns. Similarly, developments in relation to the law of succession are also anticipated, as the courts issue decisions on salient issues that are brought before them. Some of these decisions resolve conflicts that exist in the relevant laws. One example is the Supreme Court case law on certain customary laws of succession that have proved to be derogations from the fundamental rights of the female offspring of the deceased.

7 Tips and traps

7.1 What are your top tips for effective private client wealth management in your jurisdiction and what potential sticking points would you highlight?

  • Establish a relationship with financial analysts and other professionals in the sector.
  • Get acquainted with the laws and regulations guiding the wealth management industries.
  • Utilise wealth management technology to access daily investment advice which is designed to assist private clients in making the best investment choices for them.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.