New Skies Satellites B.V. (“New Skies” or the “Company”) is a company incorporated and tax resident in the Netherlands. The Company engages in the business of distributing satellite capacity across the globe via its communication satellites.
The Company entered into a contract with the Nigerian Broadcasting Corporation (NBC or the “Customer”) through a related party in Nigeria - SES Nigeria Limited (SNL). Based on the facts presented, this arrangement was in line with a Federal Government Executive Order mandating government Ministries, Departments, and Agencies (MDAs) to include Nigerian companies as parties to contracts with foreign service providers. New Skies also contracted an unrelated local Company (CWG) to provide uplinks and transmission services to the Customer.
The FIRS took the position that SNL and CWG had created a Permanent Establishment (PE) for New Skies in Nigeria. The FIRS also assessed Stamp Duties at 1% on the contract between NBC and New Skies.
The Tax Appeal Tribunal (TAT) upheld the FIRS' view and ruled that New Skies created a PE in Nigeria. On the other hand, the TAT held that New Skies is not liable to Stamp Duties.
In view of this judgement, Non-Resident Companies (NRCs) should pay a bit more attention to their arrangements with Nigerian companies, in executing contracts with Nigerian customers. The burden of proof is on the NRC to justify that the activities of the Nigerian company would not be deemed as creating a taxable presence in Nigeria for the NRC.
Please see our Tax Alert and the TAT judgement below:
Download NEW SKIES SATELLITES B.V V. FIRS