We have been informed that the Tax Appeal Tribunal (TAT) on 23 January 2015 ruled in a tax dispute between one of the International Oil Companies (IOC) and the Federal Inland Revenue Service (FIRS) regarding the use of Official Selling Price (OSP) and Realisable Price (RP) in the determination of revenue for petroleum profit tax purposes.
The OSP is usually determined by the Nigerian National Petroleum Corporation (NNPC) which in many cases could be higher than the RP (the amount earned by the oil companies from sale of crude oil). Generally the FIRS would seek to use the higher of the OSP and the RP for tax assessments.
The TAT ruled in favour of the IOC stating that the RP rather than the OSP should be used to determine revenue for tax purposes and directed the FIRS to abide by the terms of the Memorandum of Understanding (MOU) entered into between the IOC and the Nigerian government.
It will be interesting to see what steps the FIRS takes next and whether this judgement brings a closure to the issue especially for oil companies who do not operate under an MOU with the government.
Watch this space for further update!