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The Tax Appeal Tribunal’s Lagos State Division has ruled that MTN Nigeria Communications must pay N57.2 billion ($72,551,059) in tax arrears to the Federal Inland Revenue Service (FIRS). This judgment pertains to the unpaid taxes for the years spanning from 2007 to 2017.
The verdict was issued by a five-member panel led by Professor A. B. Hamed, following an appeal (TAT/LZ/VAT/075) filed by the telecom company challenging the FIRS’s demand for settling the outstanding tax.
The tribunal, however, exempted MTN Nigeria from paying the sum of $21,039,807, which was associated with penalties and interest on the principal tax amount. The other members of the panel included P. A. Olayemi, Babatunde Sobamowo, Samuel N. Ohwerhoye, and Terzungwe Gbakighir.
The genesis of this matter traces back to May 10, 2018, when the Office of the Attorney General of the Federation initiated an investigation into MTN’s Forms A and M transactions, which were related to the accounting years from 2007 to 2017.
The Office of the Accountant General of the Federation (OAGF) alleged an outstanding import duty and VAT of N242.2 billion for Form M-visible transactions. In an adjusted report dated August 20, 2018, the OAGF revised the figures, reducing the outstanding amount to $1.284 billion for Form A invisible transactions.
This ruling by the Tax Appeal Tribunal has significant financial implications for MTN Nigeria, underscoring the importance of multinational corporations operating in Nigeria adhering to tax regulations.
Background on the Tax Dispute:
In mid-2020, the Federal Inland Revenue Service (FIRS) notified MTN of a report from the OAGF concerning its alleged VAT and WHT liability. The FIRS subsequently reviewed MTN’s tax and accounting records, confirming the alleged tax liability. MTN, along with its tax consultant KPMG Advisory Services, held meetings with FIRS to resolve the dispute. 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 (first assessment).
MTN disputed the first assessment, leading to a further review by FIRS. In April 2022, FIRS issued a revised assessment of $135,697,755 to MTN. While the principal tax liability in the revised assessment was lower at $47,776,210 compared to the first assessment, the interest and penalty imposed in the revised assessment, $87,900 million, were significantly higher than those in the first assessment.
In response to FIRS’s revised assessment, MTN initiated an appeal before the Tax Appeal Tribunal, where the tribunal ruled in favor of FIRS on four key issues and in favor of MTN on one issue related to penalties and interest. The tribunal ordered MTN to settle the assessed tax liabilities accordingly.
This development underlines the importance of adhering to tax regulations for multinational corporations operating in Nigeria and has financial implications for MTN Nigeria.
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