Worldwide, taxation based on residence and source is two principles that encourage the taxation of business players in international markets/economies. Double taxation therefore poses an unavoidable risk for multinational companies with cross-border investments/operations. The search for new markets with the best margins clearly implies that multinationals will continue to invest in different economies outside their countries or markets. This makes double taxation a clear and current risk for these companies. A tax treaty is a written agreement between two countries that helps reduce the risk of double taxation and double non-taxation. In addition, a tax treaty indicates the income category, the tax treatment where that income would be taxable (at residence, at source or both) and the time of taxation. It also provides for the Mutual Agreement Procedure (MAP) for the resolution of disputes arising from the implementation of the agreement or the distribution of tax duties. Nigeria has tax agreements with fourteen (14) countries. These include Belgium, Canada, China, the Czech Republic, France, Italy, the Netherlands, Pakistan, the Philippines, Romania, Signature, Slovakia, South Africa and the United Kingdom.
On the basis of international trade conventions, each country is allowed to adopt laws, rules and regulations that govern its trade relations with other countries so that it can achieve the desired strategic objectives. An important aspect of these trade laws is the tax legislation that governs how the incomes of individual countries are taxed. Since the laws of one country may differ from those of another country, there may be potential conflicts that may impose the same income in different countries. This requires international conventions or treaties to establish conditions under which residents of different countries where conflicts are minimal can trade with each other and reduce the frequency of double taxation on their income. On the economic front, Nigeria must strategically exploit its status as the world`s 26th largest economy and largest economy, proactively using all potentials, promises and prospects on the continent and around the world through useful economic partnerships anchored in double-tax agreements. In the meantime, it is interesting to note that Nigeria`s 13 double taxation conventions are far removed from the number of other developed and developing countries. For example, the United Kingdom currently has TDTs with 131 countries, Canada has 92 TDS and Malaysia has 68 SDRs. The latest statistics have shown that there is a positive correlation between DTT and the level of inflow of foreign direct investment into Nigeria. To make Nigerian growth one of the world`s top 20 economies, it is clear that Nigeria needs to expand its existing DTT network.