The Tax Appeal Tribunal in Lagos has issued an order for MTN Nigeria Communications to pay the sum of $72,551,059 in tax arrears to the Federal Inland Revenue Service for the period spanning from 2007 to 2017.
The tribunal, however, absolved the telecommunications company from paying a further sum of $21,039,807 as penalties and interest on the principal amount.
The ruling came following a judgment delivered on Friday by a five-member panel led by Professor A. B. Hamed. Other members of the panel included P. A. Olayemi, Babatunde Sobamowo, Samuel N. Ohwerhoye, and Terzungwe Gbakighir.
The case began with the Attorney General of the Federation issuing a report in May 2018 on its investigation into MTN’s Forms A and M transactions, covering the accounting years from 2007 to 2017.
A revised report in August 2018 adjusted the alleged outstanding amounts for import duty and VAT to N242.2 billion for Form M-visible transactions, while the VAT and Withholding tax section was revised to $1.284 billion for Form A invisible transactions.
In mid-2020, FIRS received a report from the Office of the Attorney General of the Federation about MTN’s alleged liability to VAT and WHT.
FIRS conducted a review of MTN’s tax and accounting records and maintained the alleged tax liability.
MTN and its tax consultant, KPMG Advisory Services, held several meetings with FIRS to resolve the tax dispute stemming from the alleged tax liability.
In July 2021, FIRS issued a VAT assessment of $93,590,366 to MTN, which included $72,551,059 as the principal liability and $21,039,807 for penalties and interest on the principal amount (the first assessment).
MTN objected to the first assessment, leading FIRS to review the evaluation. On April 14, 2022, FIRS issued a revised assessment for $135,697,755, which included a principal tax liability of $47,776,210.
This was lower than the principal tax liability of $72,551,059 in the first assessment.
However, the interest and penalty imposed on the principal tax liability in the revised assessment amounted to $87.9 million, higher than the interest and penalty in the first assessment, which stood at $21,039,807.
MTN filed an appeal against the revised assessment, and despite objections to the FIRS’s revised assessment, FIRS declined to amend it.
This led to the case being brought before the Tax Appeal Tribunal.
Upon reviewing all the documents filed by both parties, the tribunal identified five issues for determination:
The Tax Appeal Tribunal identified the following five issues for determination in the case:
1. 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.
2. 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.
3. Whether, in the absence of the production of any false or untrue document or statement by the Appellant, the Respondent has the authority to conduct a tax investigation beyond the 5-year restriction.
4. Whether training provided by offshore facilitators outside of Nigeria is liable to VAT in Nigeria.
5. 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.
Following arguments from both sides, the tribunal ruled in favor of the FIRS on issues one to four, thereby ordering MTN to settle the assessed liabilities accordingly.
However, it ruled in favor of MTN on issue five, setting aside the penalties and interest.
