The Lagos State Tax Appeal Tribunal has directed MTN Nigeria Communications to settle a tax default of $72,551,059 to the Federal Inland Revenue Services (FIRS). This decision spans tax liabilities from the years 2007 to 2017. However, the Tribunal excused the telecom giant from settling a further $21,039,807, which was originally accounted for penalties and interest on the main sum.
The judgment was passed by a five-member panel, presided over by Professor A. B. Hamed. The appeal, referenced TAT/LZ/VAT/075, was lodged by MTN against FIRS’s demand for the unpaid taxes. Other panelists involved were P. A. Olayemi, Babatunde Sobamowo, Samuel N. Ohwerhoye, and Terzungwe Gbakighir.
This judgment’s backdrop is based on a May 10, 2018 report by the Office of the Attorney General of the Federation (OAGF), investigating MTN’s Forms A and M transactions from 2007 to 2017. A revised version of this report, dated August 20, 2018, recalculated the alleged outstanding amounts concerning import duty and VAT. While the details concerning VAT and Withholding Tax (WHT) were also adjusted, by mid-2020, FIRS had intimated MTN of its supposed liabilities in this regard.
After conducting their audit of MTN’s tax and accounting records, FIRS confirmed the OAGF’s findings. Attempts were made to resolve the dispute, with MTN and its tax consultant, KPMG Advisory Services, engaging in discussions with FIRS. Consequently, in July 2021, FIRS handed MTN a VAT assessment of $93,590,366, which included the primary liability of $72,551,059 and an additional $21,039,807 as interest and penalties.
However, MTN contested this initial assessment, leading to a further review by FIRS. In April 2022, a revised assessment of $135,697,755 was presented to MTN. Although the base tax alleged to be outstanding was lesser than the initial assessment, the imposed interest and penalties were higher.
MTN Nigeria formally objected to this revised figure in May 2022. Following FIRS’s refusal to modify the new assessment in June 2022, MTN sought redress at the Tax Appeal Tribunal.
The tribunal had to adjudicate on five key issues. These encompassed determining whether specific services, like software licensing and bandwidth capacities provided by non-residential entities, were subject to taxable supply of goods and services. Other concerns were the FIRS’s authority to conduct tax investigations beyond a five-year limit, the VAT applicability for offshore training provided outside Nigeria, and FIRS’s miscalculations regarding interest and penalty.
While MTN’s legal representatives sought a favorable ruling on these issues, FIRS’s counsel, which included Abu Ocheme, Egodi Adedeji, and Moses Ideho, requested the dismissal of MTN’s appeal.
Post deliberation, the tribunal favored FIRS on the first four issues. However, the fifth issue, related to penalties and interest, was decided in MTN’s favor. Conclusively, the tribunal ordered MTN to clear the assessed liabilities. Still, it annulled the penalties and interest, which was the tribunal’s final judgment.
