Nigeria: Tax Evasion - Tribunal Orders Firm to Pay N1.7bn to Govt

27 February 2020

The Tax Appeal Tribunal, Lagos Zone, has ruled as lawful an assessment in additional tax liability of N1.738,481,875.33 issued to Prime Plastichem Nigeria Limited (PPNL) by the Federal Inland Revenue Service (FIRS) as the correct income tax which PPNL should pay on its profit for doing business in Nigeria under the provisions of Transfer Pricing Regulation No.1 2012.

In a statement, FIRS said the tax tribunal handed down this verdict in Appeal No. TAT/LZ/CIT/015/2017 instituted before it by PPNL; which disputed FIRS's additional tax assessment liability.

The tax suit arose following disagreement between PPNL, a firm that "engages in the business of trading in imported plastics and petrochemicals", and FIRS on the Transfer Pricing Documentation filed by PPNL "for 2013 and 2014" concerning PPNL's "transaction with a related company, Vinmar Overseas Limited (VOL)."

While PPNL "adopted the Comparable Uncontrolled Price (CUP) for its filing, FIRS insisted that the Transactional Net Margin Method (TNMM) was the correct tax assessment tool to apply in this particular case.

Responding to the arguments adduced against it by PPNL at the tax tribunal, FIRS stated that PPNL "misrepresented information" to the service "by stating that VOL only engaged in information collection and liaising activities on one hand, and on the other, its submission to the tribunal indicates that VIL engages in sale of similar products as itself the appellant."

This "misinformation", according to FIRS, indicates that "the controlled transactions with VIL were not at arm's length" as claimed by PPNL, hence cannot serve as a basis for calculating the PPNL tax liability and the reliefs sought by the firm at the tribunal.

Adducing documentary evidence to support its claims, FIRS told the tribunal that PPNL assertions "in this matter is peppered with approbation and reprobation" and amounts to speaking from "both sides of the mouth" because PPNL itself admitted in both oral and documentary evidences before the tribunal that its "use of CUP method in 2013 was done in error" hence the appellant "changed the method from CUP to TNMM in 2014."

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