Federal inland revenue Service of Nigeria, FIRS and The Shell Petroleum
Company of Nigeria Limited (SPDC) have settled out of court the
lingering tax legal battle that has been going between them for the past two
years. The Shell Petroleum Company of Nigeria Limited being dissatisfied
with the decision of the Tax Appeal Tribunal (TAT) delivered on 10th
February, 2015 in Appeal number TAT /LZ/004/2014 on the deductibility of
withholding Tax dividends paid on Gas Profit filed a notice of Appeal
dated 11th March 2015 at the Federal high court in Lagos.
Company of Nigeria Limited (SPDC) have settled out of court the
lingering tax legal battle that has been going between them for the past two
years. The Shell Petroleum Company of Nigeria Limited being dissatisfied
with the decision of the Tax Appeal Tribunal (TAT) delivered on 10th
February, 2015 in Appeal number TAT /LZ/004/2014 on the deductibility of
withholding Tax dividends paid on Gas Profit filed a notice of Appeal
dated 11th March 2015 at the Federal high court in Lagos.
Shell Petroleum Development Company had filed a notice of Appeal
before the Tax Appeal Tribunal challenging the Federal inland Revenue
Service demand note dated 28th October, 2013,setting out an assessment
of withholding Tax, Penalty and interest in the sum of USD16,275,081.on
dividends on SPDC’s Gas profits for the years 2010-2011.Tax Appeal
Tribunal upheld the Federal Inland Revenue Service ‘s decision and Shell
Petroleum Development Company appealed against this decision of the Tax
Appeal Tribunal of the Federal high court.
The demand notice was issued based on the Federal inland Revenue
Service position that Shell Petroleum Development Company having enjoyed
the tax incentive provided under section 11(2) (d) of the Petroleum
Profits Tax Act Cap P13 Law of Federation of Nigeria 2004 (PPTA) for the
computation of tax liability on income natural gas operations at the
Companies Income Tax (CITA) Act Cap C21 Law of the Federation CITA at
30% rate, that the income and profits from SPDC’s gas operations must be
subjected solely to the tax regime under the Company Income Tax Act. As
such, the dividends paid out to shareholders from SPDC’s Gas Profits
are liable to withholding Tax as provided under Companies Income Tax
Act.
The Tax appeal Tribunal in dismissing SPDC appeal held that the
additional incentive provided for in section 60 of Petroleum Profit Tax
Act does not apply to Gas as such, the Companies Income Tax Act governs
the taxation of Gas income and all taxable derivatives of Gas income. Consequently, the Tax Appeal Tribunal upheld the validity of the
Demand Notice issued by the Federal Inland Revenue Service. The Federal
Inland Revenue Service then approached Shell Petroleum Development
Company to explore amicable resolution of the dispute.
In this regard FIRS and SPDC and their respective solicitors and
their officials held a reconciliatory meeting on 28th of November, 2017
to reach amicable settlement and have now agreed to settle their
differences with regard to the Demand Note issued by FIRS to SPDC for
years 2010-2011.
In line with the reconciliation exercise carried out by SPDC and
communicated to the FIRS, the FIRS has agreed to amend the tax liability
based on the actual Gas income derived by SPDC for the years
2010-2011. In full and final settlement of this dispute, SPDC agrees to pay to
the FIRS, the amended withholding Tax liability for the years of
assessment, in the sum of USD 8,979,214. The terms of settlement have been made the consent and final judgment of the court. The terms of judgement was executed on behalf of the Federal inland
Revenue Service of Nigeria by its Executive Chairman Mr Tunde Fowler
while Finance Director of The shell Petroleum Development Company of
Nigeria Limited Mr Yakov Kravchenco executed the agreement on behalf of
his company.
