MTN Nigeria Communications has been ordered by the Lagos State Division of the Tax Appeal Tribunal to pay the Federal Inland Revenue Services the sum of $72, 551, 059 as a result of tax delinquency.
The penalty ranges from 2007 to 2017. The Tribunal did not require the telecommunications company to pay the amount of $21,039,807 in penalties and interest on the main amount, nonetheless.
On Friday, a five-person panel chaired by Professor A. B. Hamed rendered decision in an appeal with the file number TAT/LZ/VAT/075 that the telecommunications business had brought against the FIRS’s demand that it pay the default.
P. A. Olayemi, Babatunde Sobamowo, Terzungwe Gbakighir, Samuel N. Ohwerhoye, and others were also on the panel.
The Office of the Attorney General of the Federation published a report of its investigation into the Forms A and M transactions of the MTN sometime around May 10, 2018, according to the processes submitted before to the appeal. The study covered the fiscal years 2007 through 2017.
However, in a revised report dated August 20, 2018, the OAGF corrected the section pertaining to VAT and Withholding tax (WHT) to the tune of $1.284 billion (Form A invisible transactions), while adjusting the alleged arrears in respect of import duty and VAT to the tune of N242.2 billion (Form M – visible transactions).
The procedures also said that the FIRS will notify MTN that it had received a report from the OAGF sometime in the middle of 2020. FIRS consequently 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 comprised the sum of $72, 551, 059m, as the principal liability and $21,039,807m, for penalties and interest on the principal sum (first assessment).
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 $135,697,755m to MTN as a 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. $47, 776, 210m, was less than the alleged principal tax liability contained in the first assessment, i.e., $72,551,059m, the interest and penalty imposed by the FIRS on the alleged principal tax liability in the revised assessment, i.e. $87.900m, 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, 039,807m.
Also MTN by a letter of notice of objection dated May 13, 2022, 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.”
While counsel to MTN urged the tribunal to determine the issues in its favour, FIRS counsel, who includes: Abu Ocheme Director Legal FIRS, Egodi Adedeji and Moses Ideho, urged the court to dismiss the MTN’s appeal, and determine the issues raised in FIRS’s favour. 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: “In 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.
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