By Jude-Ken Ojinnaka
A five member-panel of Tax Appeal Tribunal Lagos division has ordered MTN Nigeria Communications Limited to pay sum of US$ 72, 551, 059 million as tax default from years 2007 to 2017 to the Federal Inland Revenue Services (FIRS).
The Tribunal led by Professor A. B. Hamed, made the order for the payment while delivering judgement in an appeal numbered TAT/LZ/VAT/075, filed by the telecommunication giant against the demand by FIRS to pay the default.
Other members of the panel include Barrister P. A. Olayemi; Barrister Babatunde Sobamowo; Barrister Samuel N. Ohwerhoye and Barrister Terzungwe Gbakighir.
However, the tribunal exonerated and
freed the telecommunication company from paying the sum of $21,039,807 million, as imposed as penalties and interest by FIRS on the principal sum.
According to the processes filed for the appeal, the kernel of the matter was that sometimes in May 10, 2018, the Office of the Attorney General of the Federation (OAGF) issued a report of its investigation into the MTN’s Forms A and M transactions. The report covered 2007 to 2017 accounting years.
In a revised report dated August 20, 2018, the OAGF adjusted the alleged outstanding tax in respect of import duty and VAT to the tune of N242.2 billion on Form M, being visible transactions whilst the section relating to VAT and Withholding Tax (WHT) was revised $1.284 billion on Form A, being invisible transactions.
It was also stated in the processes that sometime in mid-2020, the FIRS informed the MTN that it had received a report from the OAGF in respect of its alleged liability to VAT and WHT.
Consequent upon the report, FIRS conducted a review of the MTN’s tax and accounting records and upheld the OAGF’s alleged tax liability.
But MTN and its tax consultant, KPMG Advisory Services, held series of meetings with the FIRS to resolve the tax dispute arising from the MTN’s alleged tax liability.
Thereafter, in July, 2021, the FIRS issued a VAT assessment of US$93, 590, 366 million, to the MTN. This assessment comprised the sum of US$72, 551, 059 million, as the principal liability and US$21,039,807 million, for penalties and interest on the principal sum (first assessment).
However, 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 $135,697,755 million to MTN as revised assessment.
Although the principal amount of tax alleged to be outstanding and due from the Appellant (principal tax liability) in the revised assessment, i.e. US$47, 776, 210 million, is less than the alleged principal tax liability contained in the first assessment, i.e., US$72,551,059 million. The interest and penalty imposed by the FIRS on the alleged principal tax liability in the revised assessment, i.e. US$87.900 million, 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, 039,807 million.
By a letter of notice of objection dated May 13, 2022, MTN objected to the FIRS’s 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.
Dissatisfied with the FIRS’s amended revised assessment, MTN filed the Appeal before the Tax Appeal Tribunal.
Upon reviewing all the processes filed by the parties, the tribunal distilled five issues for determination, which were:
“Whether 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.
“Whether 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.
“Whether 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.
“Whether training provided by offshore facilitators outside of Nigeria is liable to VAT in Nigeria.
“Whether the Respondent acted in error when it calculated and imposed interest and penalty on the Appellant’s alleged non-remittance of VAT liabilities, the said liabilities having not become final and conclusive.”
Whereas, counsel to MTN urged the tribunal to determine the issues in its favour, while FIRS counsel team led by Abu Ocheme Director Legal FIRS, Egodi Adedeji and Moses Ideho, urged the court to dismiss the MTN’s appeal, and determined the issues raised in FIRS’s favour.
After hearing arguments from the parties and perusal of all the processes filed by parties and plethora of authorities cited,
the tribunal determined issues one to four in favour of the FIRS, while issue five was determined in favour of MTN.
In the judgement, the tribunal held that: “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 favour of the Appellant and is therefore set aside by this Honourable Tribunal.
“This is our Judgement.”