On October 20, 2023, the Lagos state division of the Tax Appeal Tribunal ordered MTN Nigeria to pay the sum of $47,776,210 in taxes to the Federal Inland Revenue Services (FIRS).
The ruling was delivered by a five-man panel of the Tribunal led by A.B. Hamed in an appeal marked TAT/LZ/VAT/075.
The matter began on September 4, 2018, when the then Attorney General of the Federation, Abubakar Malami unilaterally imposed $2 billion in back taxes on MTN Nigeria, resulting in a legal action by MTN Nigeria against the AGF. In 2020, the AGF referred the matter to the Federal Inland Revenue Service (FIRS) and Nigeria Customs, withdrawing the letter of demand for the aforementioned $2 billion issued in 2018.
A series of engagements between FIRS and MTN led to the amount being revised to $93.6 million, comprising $72.6 million as principal liabilities and $21 million for penalties and interest. MTN’s objection to this amount resulted in an upward review to $135.7 million, comprising a principal tax liability of $47.8 million, while interest and penalty amounted to $87.9 million.
With this development, MTN filed an appeal at the Tax Appeal Tribunal.
MTN Nigeria submitted five crucial issues to the Tribunal for determination. The first matter seeks to establish whether, considering the clear and unequivocal provisions of the VAT Act before the amendment by the Finance Acts, the provision of software, licensing, and upgrades qualifies as a taxable supply of goods and services. The second issue in question is whether the provision/lease of bandwidth capacities through transponders located in the satellite qualifies as a taxable supply of goods and services.
In addition, MTN is seeking clarity on whether, in the absence of the production of any false or untrue document or statement by MTN, the FIRS has the authority to conduct a tax investigation beyond the 5-year restriction. Another aspect involves determining whether training provided by offshore facilitators outside of Nigeria is liable to VAT in Nigeria. The final point for consideration is whether the FIRS acted in error when it calculated and imposed interest and penalty on MTN’s alleged non-remittance of VAT liabilities, considering that the said liabilities have not become final and conclusive.
The recent ruling of the Tax Appeal Tribunal appears to not exactly favour both parties in the matter. While it absolved MTN from paying the sum of $21,039,807 as penalties and interest on the principal sum, FIRS would wish to receive the sum.
Finally, it is noteworthy to state that the case holds the potential to improve Nigeria’s tax jurisprudence, strengthen the country’s finance system, and ultimately improve confidence in the business community. Hence, stakeholders are watching keenly.