A Life in Tax: The Repayment That Wasn’t Just a Repayment. One afternoon, a senior and respected colleague called me with what sounded like a simple question. “A Telecommunication Company has paid our Nigerian client professional fees and deducted VAT and WHT.
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Now the Nigerian company wants to repay its parent company in Dubai that financed part of the project. Is there any tax implication on the repayment?”
On the surface, it sounded routine. But in tax practice, nothing is ever “just a repayment.” I have learned over the years that the real issue is never the payment — it is the character of the payment.
So I asked the first question I always ask: What exactly are they repaying? If the Dubai parent gave a properly documented loan, then repayment of the principal is merely a return of capital — no WHT, no drama.
But if there is interest embedded in that repayment, Nigerian law is clear: 10% Withholding Tax applies on the interest paid to a non-resident. That part is straightforward. The real danger begins when there is no formal loan agreement, no clear structure, and no supporting documentation.
In such cases, what the company calls “repayment” may be viewed by the Nigeria Revenue Service as a management fee, technical service fee, or even disguised profit repatriation and that triggers WHT exposure.
Then comes the layer most businesses underestimate: Transfer Pricing. Because this is a related-party transaction, the Nigeria Revenue Service will not stop at asking whether WHT was deducted.
They will ask whether the financing was at arm’s length, whether the interest rate is commercially justifiable, whether the debt level is reasonable, and whether proper documentation exists.
In my years in practice, I have seen repayments re-characterised simply because companies assumed relationship replaces structure. It does not. In tax, substance always overrides labels.
That day ended the way many of my days in tax end with clarity replacing assumption. The repayment itself was not the problem. The structure was.
And in A Life in Tax, that is a recurring lesson: before you pay, before you deduct, before you remit — define the transaction. Because in cross-border tax matters, what you call a repayment today can become an assessment tomorrow.
Olatunji Abdulrazaq CNA,ACTI,ACIArb(UK)
Founder/CEO,Taxmobile.Online
