SECTION 68 OF THE NIGERIAN TAX ADMINISTRATION ACT ON THE ASSIGNMENT OF OUTSTANDING TAX DEBTS TO THIRD PARTIES

Section 68 Of The Nigerian Tax Administration Act On The Assignment Of Outstanding Tax Debts To Third Parties

Following our last publication on Section 60 of the Nigerian Tax Administration Act (NTAA), which examined the power of the relevant tax authority to appoint an agent to recover tax from funds or assets belonging to a defaulting taxpayer, this week’s tax brief examines Section 68 of the Act. The provision examines the conditions that must be satisfied before the relevant tax authority may assign outstanding tax debts to accredited third parties for recovery.

When Can Outstanding Tax Debts Be Assigned?

Section 68(1) empowers the relevant tax authority to assign outstanding tax debts, wholly or partially, to an accredited third party, who assumes responsibility for recovering the debt in accordance with the Act or regulations issued by the Service.

However, the authority to assign tax debts is not unrestricted. Under Section 68(2), two conditions must be satisfied before an assignment can be made. First, all legal steps for recovering the debt under the Act must have been exhausted, including the issuance of notifications and payment demands, as well as the pursuit of applicable enforcement actions. Second, the outstanding debt must be considered significant in value and must have remained unpaid for a period deemed appropriate by the relevant tax authority.

Who Can Recover an Assigned Tax Debt?

Section 68(5) defines a third party to include banks and other financial institutions, debt recovery practitioners, and any other person accredited by the relevant tax authority. The section also gives a broad meaning to the word “assign”, encompassing the transfer of rights to recover a tax debt, including the sale or delegation of the authority to recover, manage and enforce the debt, whether wholly or partially.

Consequently, the provision allows the relevant tax authority to utilise accredited external entities and professionals to pursue outstanding tax liabilities, subject to the satisfaction of the conditions governing the assignment and recovery process.

Notice to Taxpayers and the Authority to Reverse an Assignment

Importantly, Section 68(3) requires the relevant tax authority to notify a taxpayer in writing where the taxpayer’s debt has been assigned to a third party. The notice must disclose the details of the third party responsible for recovering the debt. This requirement enables the taxpayer to identify the party authorized to handle the recovery process.

Furthermore, Section 68(4) preserves the authority’s power to reverse the assignment at any time and resume responsibility for recovery where necessary. Thus, assigning a debt does not permanently divest the tax authority of its recovery responsibilities or control over the matter.

Conclusion

Section 68 of the NTAA establishes a structure for assigning outstanding tax debts to accredited third parties, subject to the exhaustion of prescribed recovery measures and the relevant authority’s assessment of the debt’s value and duration. Read alongside Section 60, the provision highlights approaches to tax recovery: appointing an agent to pay tax from funds or assets held for a taxpayer and assigning an outstanding tax debt to an accredited third party for recovery. Taxpayers and businesses should therefore understand the implications of these provisions, maintain tax compliance, and promptly seek professional advice when faced with recovery action.