Tax & Business Matters - Nigeria

Non resident companies to file full tax returns effective from 2015 tax year

The FIRS has issued a Public Notice informing all taxpayers, especially non resident companies carrying on business in Nigeria, to submit full income tax returns as required by law. The returns must include detailed tax computations and capital allowances in addition to audited financial statements. According to the Notice, the turnover (deemed profit) basis of assessment can only be used at the discretion of the FIRS.

Non-resident companies that have not filed full tax returns in the past are to comply as from 2015 year of assessment (financial year 2014). This is a departure from the earlier indication by the FIRS Transfer Pricing Department that the directive would take effect from 2014 year of assessment (financial year 2013).

Below is our Tax Alert and a copy of the Notice for your information.

Download PwC Tax Alert_FIRS Notice for non-resident to file full tax returns_Jan 2015

Download Nigeria Public Notice on Income Tax Returns by Non Resident Companies 

What price should an oil company use to determine its revenue for tax purposes?

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.

 

I have uploaded a copy of the judgement below for your reference.

 

Download TAT ruling on realisable price_Jan 2015

What about the 2015 Budget?

“A budget is telling your money where to go instead of wondering where it went.” – Dave Ramsey

2015 is set to be a challenging year for government at all levels… but the good news is that the most impactful changes do not require money – what they require is common sense and a political will.

Nigeria must be prudent with spending and be realistic with revenue expectation especially the oil price benchmark. Like George Washington once said, “we must consult our means rather than our wishes.”

Read my article on the budget in today's Guardian Newspaper pg 55 or download a copy below.

Download What about the 2015 Budget

Also available for download is our Budget Bulletin released in December 2014.

Download PwC_Nigeria's 2015 Budget Bulletin

Tax Appeal Tribunal says withholding tax is due on dividends from gas profits

The Tax Appeal Tribunal (TAT) has ruled in favour of the Federal Inland Revenue Service to levy withholding tax on dividends paid out of gas profits by upstream petroleum companies. Under the Petroleum Profit Tax (PPT) legislation, there is no withholding tax on dividends paid from profits taxed under the PPT law whereas dividends from profits which are taxable under the Companies Income Tax (CIT) legislation are subject to withholding tax. The PPT law permits an oil & gas company to pay tax on its gas profit at the CIT rate hence the question as to whether other provisions of the CIT law apply to an upstream company regarding its gas operations.

Read further details in our tax alert below:

Download Tax Tribunal rules for WHT on gas profit distribution

Lagos State has announced significant reductions in property transfer taxes

The governor of Lagos state, Nigeria has issued an Executive Order effectively reducing the charges payable for the transfer of land titles and processing Governor's Consent from about 15% to 3%. The Order which was signed and dated 5th of January 2015 takes effect immediately. See a copy of the Order and our Tax Alert below.

Download Executive Order_Reduction of land transaction charges by Lagos State 

Download PwC Alert_Reduced Land Transaction Charges

How the past will shape the future: A review of the major tax events of 2014 and the outlook for 2015

Exactly one year ago, my prediction for 2014 was published in the Guardian Newspaper (see excerpt below):

"Given the likelihood of excess crude oil supply globally in 2014, as a result of key factors such as the recent G5+1 deal with Iran, shale oil development, various crude oil discoveries across Africa and so on; one would expect the price of crude oil to fall. This will put further pressure on the dwindling government revenue in the face of rising expenditure profile particularly on education following the 6-month strike by ASUU, security and defence and election spending.

The revenue gap will be funded partly by borrowing, and also by tax. It will be unpopular in a pre-election year to introduce new taxes except it affects a selected few like luxury tax on private jets. Therefore government will seek to expand the tax net to get more from the existing taxes. Presumptive tax for the informal sector is a potential consideration. Also inflation tax by way of quantitative easing and devaluation of the Naira against major currencies are probable. I expect government to have less appetite for tax incentives and waivers and make a move to stop the abuse of existing incentive regime. The planned rebasing of Nigeria’s GDP will make the current abysmal ratio of tax revenue to GDP of less than 7% even worse. Tax authorities will therefore be put under immense pressure to collect more taxes." (full article attached).

The year 2014 will go down in history as one year in which tax matters was prominent in national and global discourse across the spectrum.

Read my article published in today's BusinessDay which outlines some of the major events of the past year and looks into the crystal ball for 2015 covering various aspects from fiscal policy and legislation to administration and tax adjudication.

Download PwC Article_Review of 2014 and Outlook for 2015 

Download Taiwo's 2014 Tax Predictions_Published 6 Jan 2014

Nigeria's 2015 Budget: What does the new fiscal year hold?

First, let me start by wishing you all a Splendid 2015!

As we settle in to the new year, I thought to share with you our analyses of the fiscal and macro-economic implications of the 2015 Budget of the Federal Government of Nigeria to enable you plan ahead. Also included below are links to my recent interview with Channels TV on the subject, the budget speech by the Finance Minister and a presentation by the Director General of the Budget Office of the Federation.

The 2015 Budget was presented to the National Assembly on 17 December 2014. Described as “A Transition Budget”, the focus will be on “managing the revenue challenge in a manner that protects the most vulnerable while safely transiting to a broader based non-oil driven economy”.

Download PwC_Nigeria's 2015 Budget Bulletin

Download CME Budget Speech 2015

Download 2015 Budget Presentation (DGB)

My Channels TV Interview Part 1

My Channels TV Interview Part 2

Download Tax Calendar_January 2015