Tax & Business Matters - Nigeria

Tax Appeal Tribunal affirms that statutes supercede any contractual arrangements

In December 2015, the Tax Appeal Tribunal (TAT) ruled that an upstream company can deduct capital allowances (CA) on capital expenditure incurred in line with the Petroleum Profits Tax Act (PPTA), regardless of whether or not such costs have been approved by a counter party under a contractual agreement. This ruling was issued in a case brought before the TAT by an International Oil Company (“IOC” or “Appellant”) against the Federal Inland Revenue Service (“FIRS” or “the Respondent”).

This decision provides some clarity on the long standing debate on whether tax deductibility is dependent on cost recoverability for upstream oil companies in Nigeria. While both concepts are separate and should be treated distinctly, the complex nature of contractual agreements in Nigeria’s upstream industry can make the lines between both very blurry.

Find out more Download PwC Tax Alert_TAT Ruling on Modified Carry Arrangements

 

Tribunal directs FIRS to accept tax returns prepared by contractors in a PSC arrangement – again!

The Tax Appeal Tribunal (TAT) on 18 November 2015 held that the Federal Inland Revenue Service should accept tax computations prepared by the Contractor of a Production Sharing Contracts (PSCs) in assessing PSC parties to Petroleum Profits Tax.

It is interesting that this issue is still in dispute given that the TAT arrived at the same decision only a few months earlier on another case with almost identical facts.

See our alert below and a copy of the judgment;

Download PwC Tax Alert_TAT says FIRS must accept PSC contractors' tax returns

Download TAT ruling on PSC tax returns_Jan 2016

Nigeria joins 30 other countries to sign tax cooperation agreement for automatic sharing of country-by-country information

On Wednesday 27 January 2016, 31 countries (including Nigeria) signed the Multilateral Competent Authority Agreement (MCAA) for the automatic exchange of Country-by-Country reports. According to the OECD, this is part of continuing efforts to boost transparency by multinational enterprises (MNEs) and the signing marks an important milestone towards implementation of the OECD/G20 BEPS Project. It is also a significant indication of cross-border cooperation on tax matters.

The MCAA will enable consistent and swift implementation of new transfer pricing reporting standards developed under the BEPS Action Plan. It will ensure that tax administrations obtain a complete understanding of the way MNEs structure their operations, while also ensuring that the confidentiality of such information is safeguarded.

PwC Tax Alert Download PwC Alert_Nigeria signs agreement for automatic exchange of Country-by-Country Reports

You can read more here: OECD Press Release on MCAA

 

Tax Appeal Tribunal denies deduction for recharges under deemed profits regime

On 22^nd January 2016, the Tax Appeal Tribunal (TAT) sitting in Lagos reinforced the principle established by the Court of Appeal in FIRS v Halliburton and by the Tribunal’s earlier decision in Weatherford Services S. de R.L. v FIRS that a taxpayer filing returns under the deemed profits regime is not entitled to any deduction other than the 80% deemed cost.

The TAT also restated the position of the law on the legal status of information circulars in relation to principal legislation such as the Companies Income Tax Act (CITA).

Download Treatment of recharges_TAT_PwC Tax Alert

Download TAT judgment on recharges for NRCs

Tax Appeal Tribunal affirms itself as an administrative body not bound by strict court rules

The Tax Appeal Tribunal (TAT) has ruled that it is not bound by the strict rules of evidence contained in the Evidence Act while performing its functions as an administrative tribunal charged with the responsibility of entertaining disputes between taxpayers and tax authorities.

This ruling underscores the importance of speedy resolution of tax disputes through a flexible framework which may be undermined if the tribunal operates strictly like a conventional court and follows strict procedural rules.

See our alert below for details.

Download TAT Affirms Self as Administrative Tribunal_PwC Alert

Download TAT ruling on its administrative body status

FCT Internal Revenue Service commences tax assessments and collection

The ministry of finance has issued a federal treasury circular dated 15 January 2016 following the newly enacted Federal Capital Territory Internal Revenue Service (FCT IRS or the Service) Act 2015. The circular directed all ministries, departments and agencies (MDAs) operating in the FCT to remit all deductions made under the Pay As Your Earn (PAYE)/Personal Income Tax (PIT) scheme for persons working or residing in the FCT to the FCT IRS. Additionally, all capital gains tax arising from the disposal of assets and property within the territory are also to be remitted to the Service.

See attached for further details:

Download FCT IRS- begins full operation_PwC Tax Alert

Download Fed Treasury Circular on FCT IRS Tax Payment

Nigeria signs double tax treaty with United Arab Emirates

As part of the ongoing visit by President Muhammadu Buhari to the United Arab Emirates (UAE), both countries today signed six agreements on Trade, Finance and Judicial Matters; Avoidance of Double Taxation; Trade Promotion and Protection; Judicial Agreements on Extradition, Transfer of Sentenced Persons; Mutual Legal Assistance on Criminal Matters; and Mutual Legal Assistance on Criminal and Commercial Matters, which includes the recovery and repatriation of stolen wealth.

It should be noted that there is no income tax in the UAE compared to Nigeria so it will be interesting to see how the double taxation avoidance treaty will be equally beneficial to both countries. The signed treaty will require ratification by the Nigerian parliament before it becomes effective.

Watch this space for more details and a copy of the double tax agreement.

Stamp Duties now payable on banking transactions

In an attempt to raise non oil revenue, the Central Bank of Nigeria has directed all banks to enforce collection of N50 stamp duty for receipted transactions including online transfers of N1,000 and above effective immediately.

See our analysis below and a copy of the CBN directive for details.

Download PwC Tax Alert_Stamp duty on banking transactions

CBN Directive on stamp duties

My Interviews: 2016 Paying Taxes Survey & IMF's Recommendation to Increase VAT Rate

Watch my interviews on CNBC Africa on the recent recommendation by the International Monetary Fund for Nigeria to increase our current VAT rate. I also shared my thoughts on the tax systems in Africa based on the 2016 Paying Taxes Report, a joint survey by PwC and the World Bank.

IMF and VAT  

Paying Taxes 

2016 Tax Outlook: What you should expect in the new year and how to be better prepared

Going forward, aggressive tax avoidance will become the new tax evasion. Tax planning will therefore be tempered with low appetite for risk especially reputational damage while the debate on tax morality will intensify.

Welcome to 2016!

It’s a New Year and time to look forward with hope for better days ahead. Whilst being optimistic about the future one must be mindful that there is bound to be challenges as uncertainties will continue to exist in the world in every human endeavour. This outlook applies also to tax and fiscal policies.

Read my article published in BusinessDay today (pg 9) on what to expect in the tax environment in 2016.

Download 2016 Tax Outlook_PwC