A tax appeal tribunal in Lagos has ordered MTN Nigeria Communications to pay $72, 551, 059 in tax default to the Federal Inland Revenue Services (FIRS).
A five-member panel of the tribunal led by A. B. Hamed gave the order on Friday while delivering judgment in an appeal marked TAT/LZ/VAT/075, filed by MTN Nigeria.
BACKGROUND
On May 10, 2018, the office of the attorney-general of the federation issued a report detailing the findings of its investigation into MTN’s Forms A and M transactions. The report covered the 2007 to 2017 accounting years.
In a revised report dated August 20, 2018, the OAGF adjusted the alleged outstanding in respect of import duty and VAT to the tune of N242.2 bn, (Form M -visible transactions) whilst the section relating to VAT and Withholding tax (WHT) was revised $1.284 bn (Form A invisible transactions).
According to the procedures, MTN was notified by the FIRS that it had obtained a report from the OAGF regarding its potential VAT and WHT liabilities, sometime in the middle of 2020.
FIRS went ahead to conducted a review of MTN’s tax and accounting records and upheld the OAGF’s alleged tax liability.
However, MTN and its tax consultant, KPMG Advisory Services, held a series of meetings with FIRS to resolve the tax dispute arising from MTN’s alleged tax liability.
Thereafter, in July 2021, the FIRS issued a VAT assessment of $93,590,366m to the MTN. This assessment included $21,039,807 million for penalties and interest on the principal amount and $72, 551,059 million which is the principal sum.
Following MTN’s objection to the initial evaluation, the FIRS further examined the assessment. As a result, the respondent sent MTN a revised assessment for $135,697,755 million through the Notice of Assessment dated April 14, 2022.
In the new assessment, the principal amount of tax was reduced to $47, 776, 210m, while the interest was $87.900m.
Although MTN still objected to the FIRS’s revised assessment, the revenue service refused to amend the revised assessment.
Consequently, the telecommunications company filed an appeal before the tax appeal tribunal.
ISSUES RAISED AT THE 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.”
In its verdict, the first four issues were resolved in favour of the FIRS while issue five was resolved in favour of MTN.
The tribunal thereby ordered MTN to pay the $72, 551, 059 principal sum.
However, it absolved MTN from paying the sum of $21,039,807 as penalties and interest on the principal sum.
