Section 46 — Artificial transactions

(1) Where a relevant tax authority is of the opinion that any disposition is not in fact given effect to or that any transaction which reduces or would reduce the amount of any tax payable is artificial or fictitious, it may disregard any such disposition or direct that such adjustments be made, as regards liability to tax, as it considers appropriate so as to counteract the reduction of liability to tax affected, or reduction which would be affected by the transaction and any taxable person concerned shall be assessed accordingly.

(2) For the purpose of this section, transactions between persons who are connected in accordance with section 193 of the Nigeria Tax Act shall be deemed to be artificial or fictitious if in the opinion of the relevant tax authority those transactions have not been made on terms which might fairly have been expected to have been made by persons engaged in the same or similar activities dealing with one another at arm’s length.

(3) A person in respect of which any direction is made under this section shall have a right of appeal as if such direction were an assessment under this Act.

(4) The relevant tax authority may issue guidelines or regulations for the purpose of specifying rules for the taxation of connected persons, transactions that are not at arm’s length, or for the purpose of implementing other provisions of this section.

(5) In this section, “disposition” includes any trust, grant, covenant, agreement or arrangement.