*The Lagos State Division of Tax Appeal Tribunal has ordered MTN Nigeria Communications Plc to pay $72, 551,059, in tax default covering 2007 to 2017 accounting years to the Federal Inland Revenue Services, stating the 鈥榠ssue five in relation to penalty and interest is resolved in favour of the Appellant and is, therefore, set aside by this Honourable Tribunal. This is our Judgement鈥�

Isola Moses | 绿帽献妻

For its apparent tax liability to Value-Added Vat (VAT) and Withholding Tax (WHT) spanning about a decade in its country of operations, the Lagos State Division of Tax Appeal Tribunal (TAT) has ordered MTN Nigeria Communications Plc to pay $72, 551,059, in tax default to the Federal Inland Revenue Services (FIRS).

绿帽献妻 reports MTN Nigeria Communications has lost its appeal case, challenging the FIRS earlier order mandating the leading telecoms company to pay for tax default to FIRS, as the Tribunal slamed the fine on the South African-owned telecoms giant.

Photo collage: TAT

The Tax Tribunal absolved the telecommunication firm from paying the sum of $21,039,807, as penalties and interest on the principal sum involved in the lingering tax dispute with the Nigerian tax administration authorities.

Prof. A. B. Hamed, who led a five-man panel, gave the verdict and order last Friday, while delivering judgment in an appeal numbered TAT/LZ/VAT/075, ealier filed by MTN Nigeria Comminications against the request by the FIRS to pay the default.

Other members of the panel are P. A. Olayemi, Babatunde Sobamowo, Samuel N. Ohwerhoye and Terzungwe Gbakighir.

The Genesis

According to the processes filed before the appeal, sometime May 10, 2018, the Office of the Attorney General of the Federation (AGF), in Nigeria, was said to have issued a report of its investigation into the MTN鈥檚 Forms A and M transactions. The report covered the 2007 to 2017 accounting years of the Mobile Network Operator (MNO) in the West African country.

However, in a revised report dated August 20, 2018, the OAGF adjusted the reported outstanding tax liability in respect of import duty and VAT to the tune of N242.2 bn, (Form M -visible transactions), whereas the section relating to VAT and Withholding Tax (WHT) was revised $1.284 bn (Form A invisible transactions).

The processes also stated that sometime in mid-2020, the FIRS informed MTN that it had received a report from the OAGF in respect of its alleged liability to VAT and WHT.

The Nigerian tax regulatory agency consequently, conducted a review of MTN鈥檚 tax and accounting records and upheld the OAGF鈥檚 alleged tax liability.

MTN and its tax consultant, KPMG Advisory Services, however, held a series of meetings with FIRS to resolve the tax dispute arising from MTN鈥檚 purported tax liability.

Thereafter, in July 2021, the FIRS issued a VAT assessment of $93, 590, 366million to the MTN.

This assessment comprised the sum of $72, 551, 059million, as the principal liability and $21,039,807m, for penalties, and interest on the principal sum (first assessment).

Yet, MTN objected to the first assessment whereupon the FIRS further reviewed the assessment.

Accordingly, by the Notice of Assessment dated April 14, 2022, the Respondent issued a revised assessment for US $135,697,755million to MTN as a revised assessment.

It was gathered although the principal amount of tax alleged to be outstanding and due from the Appellant (principal tax liability) in the revised assessment, i.e., $47, 776, 210million, was less than the alleged principal tax liability contained in the first assessment, i.e., $72,551,059million, the interest and penalty imposed by the FIRS on the alleged principal tax liability in the revised assessment, i.e., $87.900million, is higher than the interest and penalty imposed by the FIRS on the alleged principal tax liability in the first assessment, i.e., US $21, 039,807million.

By a letter of notice of objection dated May 13, 2022, MTN also objected to the FIRS鈥檚 revised assessment, and FIRS by a letter dated June 16, with Ref. No. FIRS/TID/LOS/2020/0213/01, notified the MTN of its refusal to amend the revised assessment.

The telecoms company was dissatisfied with the FIRS鈥檚 amended revised assessment, and subsequently, filed an appeal before the Tax Appeal Tribunal in the country.

Upon reviewing all the processes filed by the parties, the tribunal distilled five issues for determination, which were: 鈥淲hether in view of the clear and unequivocal provisions of the VAT Act prior to the amendment by the Finance Acts, the provision of software licensing and upgrades qualified as a taxable supply of goods and services.

鈥淲hether the provision/lease of bandwidth capacities by Intelsat Global Services & Marketing Ltd, a non-resident entity, through transponders located in the satellite, qualifies as a taxable supply of goods and services.

鈥淲hether in the absence of the production of any false or untrue document or statement by the Appellant, the Respondent has authority to conduct a tax investigation beyond the 5-year restriction.

鈥淲hether training provided by offshore facilitators outside of Nigeria is liable to VAT in Nigeria.

鈥淲hether the Respondent acted in error when it calculated and imposed interest and penalty on the Appellant鈥檚 alleged non-remittance of VAT liabilities, the said liabilities having not become final and conclusive.鈥�

As Counsel to MTN urged the Tribunal to determine the issues in its favour, FIRS counsel, who include Abu Ocheme, Director Legal FIRS, Egodi Adedeji and Moses Ideho, also urged the court to dismiss the MTN鈥檚 appeal, and determine the issues raised in FIRS鈥檚 favour.

Tribunal鈥檚 verdit against MTN

The Tribunal, after taking arguments on the parties, resolved issues one to four in favour of the FIRS, and issue five was resolved in favour of MTN.

The Tribunal after perusing all the processes filed by parties, and citing a plethora of authorities held that: 鈥淚n the final analysis, it is the decision of the Tribunal that issues one to four discussed above are all resolved in favour of the Respondent and the appellant is, therefore, ordered to settle the assessed liabilities accordingly.

The Tribunal stated: 鈥淗owever, issue five in relation to penalty and interest is resolved in favour of the Appellant and is, therefore, set aside by this Honourable Tribunal. This is our Judgement.鈥�

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