The Tax Appeal Tribunal (TAT) on 18 September 2014 passed a judgement in a case between Nigeria Agip Oil Company Limited and the Federal Inland Revenue Service (FIRS) regarding the deductibility of interests on intercompany loans.
The TAT ruled that in so far as such intercompany loans meet the arm's length principles, in other words, if the terms are similar to a loan between unrelated parties, then the interest is tax deductible.
The FIRS has long held the view that interest on any intercompany loan by an upstream oil company is not tax deductible. The TAT ruling effectively supports common law principles and the need for a transfer pricing analysis by related parties regarding such transactions.
See a copy of the ruling below and our tax alert for further insights.