Emmanuel OchayiThe Lagos Zone Tax Appeal Tribunal has ordered MTN Nigeria Communications to pay a sum of $72,551,059 million, an equivalent of N59, 298,475,000 billion back taxes to the Federal Inland Revenue Services (FIRS) for the years 2007 to 2017.
However, it’s a bittersweet victory for the tax authorities, as they had to exempt the telecommunication house from paying an additional $21,039,807 million in penalties and interest on the principal sum.
Sources told Prime Business Africa that actual number to be paid by MTN is no where close to the amount being reported in the media.
Our correspondent gathered that MTN actually appealed the matter at the Tax Appeal Tribunal (TAT) and got the figure reduced to $47.8 million dollars.
“Tax disputes are normal among corporates and this is just one of such cases,” a source close to the matter told Prime Business Africa Wednesday night.
The Tax Appeal Tribunal was established in 2007 vide Section 59 of the FIRS Act. Its proceedings are guided by the provisions in the 5th Schedule of the Act and by the Tax Appeal Tribunal Procedure Rules of 2010.
Section 1(1) of the 5th Schedule, creates the Tribunal and gives it power to adjudicate over all matters arising from and pertaining to the Taxes contained in the 1st Schedule of the FIRS Establishment Act of 2007 as follows:
I. Companies Income Tax Act
II. Petroleum Profit Tax Act
III. Personal Income Tax Act
IV. Capital Gains Tax Act
V. Stamp Duties Act
VI. Value Added Tax Act
VII. Any other law contained in or specified in the First Schedule to this Act or other laws made or to be made from time to time by the National Assembly.
A five-member panel, led by Prof. A. B. Hamed, presided over this high-stakes judgment. The appeal, numbered TAT/LZ/VAT/075, was filed by MTN against the FIRS’s request to clear their outstanding tax debt.
The crux of the matter dates back to May 10, 2018 when the Office of the Attorney General of the Federation (OAGF) initiated an investigation into MTN’s Forms A and M transactions, covering the accounting years 2007 to 2017.
An initial report by the OAGF adjusted the alleged outstanding tax debt to a N242.2 billion. A revised report in August 2018 reduced the tax liability to $1.284 billion.The FIRS later received a report from the OAGF regarding MTN’s liability to VAT and Withholding Tax (WHT). After a review of MTN’s tax and accounting records, the FIRS upheld the OAGF’s claims.
MTN, along with their tax consultant, KPMG Advisory Services, engaged in numerous meetings with the FIRS to resolve this complex tax dispute. In July 2021, the FIRS issued a VAT assessment of $93,590,366 million to MTN.
This assessment comprised $72,551,059 million as the principal liability and $21,039,807 million for penalties and interest on the principal sum (first assessment).
MTN objected to the first assessment, prompting the FIRS to further review the figures. In April 2022, the FIRS issued a revised assessment for $135,697,755 million, albeit with a lower principal amount of $47,776,210 million but with higher interest and penalty charges of $87.9 million.
Despite MTN’s objections, the FIRS refused to amend the revised assessment. This prompted MTN to file an appeal before the Tax Appeal Tribunal, resulting in this momentous judgment.
During the proceedings, the tribunal examined various aspects of the dispute, addressing key issues such as software licensing, the provision of bandwidth capacities by non-resident entities, the statute of limitations for tax investigations, offshore training, and the calculation of interest and penalties. Ultimately, the tribunal resolved issues one to four in favor of the FIRS and issue five in favor of MTN.
The tribunal’s final verdict states, “In the final analysis, it is the decision of this Honourable 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. However, issue five in relation to penalty and interest is resolved in favor of the Appellant and is therefore set aside by this Honourable Tribunal.”
This judgment has implications for the MTN Nigeria and the broader corporate landscape. It highlights the ongoing complexities and challenges surrounding tax disputes in Nigeria and underscores the importance of clarity in tax regulations.
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