1.

Brasoil Oil Services Company (Nigeria) Limited vs FIRS1

TAT/LZ/VAT/008/2015
TAT/LZ/WHT/009/2015
(Consolidated Appeals)

Background/facts of the case

The appellant involved in the provision of services in all areas of the oil industry
signed a technical service agreement (TSA) with Petrobras SA (Brasoil) for the
provision of technical support covering the period 2006 to 2012. As consideration for
the support provided, the appellant invoiced Brasoil for reimbursable expenses
incurred on behalf of the Company, plus a mark-up of 12% in line with the terms of
the TSA.

The respondent (FIRS) audited the appellants records for the 2006 2008, 2010
and 2012 financial years. FIRS raised value added tax (VAT) and withholding tax
(WHT) assessments on service fees and reimbursable expenses paid by the appellant
to its offshore related parties under their TSA.

Issues for determination

- Is the appellant liable to pay VAT on reimbursable expenses?

- Is the appellant liable to deduct WHT on payment of salaries and reimbursable

expenses?

- Does Nigerian tax statutes apply extraterritorially are expenditures incurred

wholly outside Nigeria liable to VAT?

- Are taxpayers liable to interests and penalties on unpaid assessments that are
being contested and as a result can be said not to have become final and
conclusive

Ruling/ Judgement

Upon evaluation of the issues submitted, the TAT ruled as follows:

- Reimbursable expenses and employee cost are not subject to VAT and WHT.
However, for the purpose of the TSA between the Company and Petrobras, the
salaries paid to employees on secondment were considered to be part of the cost
of rendering the technical service, as these were not specifically listed as
expenses to be reimbursed in the TSA

- Interest and penalties were not yet due on the disputed assessment, in line with
the TAT decision in the case of Weatherford Services vs. FIRS.

1
Federal Inland Revenue Service
2. Nigerian Breweries Plc vs FIRS
TAT/LZ/CIT/EDT/043/2015

Background/facts of the case

The appellant paid buying commission and handling charges to a foreign-related

company under an arrangement for procurement of goods outside Nigeria. The
appellant then deducted the buying commission and handling charges in arriving at
its assessable profits for 2008 to 2014 years of assessment.

The respondent (FIRS) audited the appellants records for the 2008 - 2014 financial
years and rejected deductions the appellant made for commissions and handling
charges it paid to its non-resident affiliate for offshore procurement of goods.

Issues for determination

- Whether offshore expenses incurred on behalf of a Nigerian company were

deductible under Companies Income Tax Act (CITA)

Ruling/ Judgement

The tribunal ruled as follows:

- That the appropriate interpretation of section 27(i) of CITA is to the effect that it
is only expenses incurred by a (Nigerian) taxable company outside Nigeria for
another company that will be disallowed as a deductible expense

- Section 24 of CITA (the WENR rule) represents the whole rule of determination of
the deductibility of expenses under CITA

3. Star Deep Water Petroleum Limited vs LIRS2

TAT/LZ/022/2012

Background/facts of the case

The appellant (Star Deep) entered into two agreements with Chevron Nigeria Limited
(Chevron) which allowed it use of Chevron's resources, including personnel, to
enable it carry out its business activities.

In 2011, the respondent (LIRS) audited the appellants tax compliance profile for
2005-2009 and assessed the appellant to pay as you earn (PAYE), WHT, State
Development Levy and Business Premises Registration liabilities and subsequently
issued a demand notice. The WHT was assessed on best of judgment (BOJ) basis.

Chevron claimed it forwarded a notice of objection to LIRS but could not provide an
acknowledged copy of the notice. LIRS subsequently served a notice to obtain
warrant of distrain on the appellant. The appellant appealed against both notices.

2
Lagos State Internal Revenue Service
 Issues for determination

- Whether the tax assessments issued on the appellant has become final and
conclusive in the absence of a notice of objection acknowledged by LIRS

- Whether a company without employees is required to remit PAYE

- Whether Star Deep deducted and remitted WHT to the LIRS in accordance with
applicable laws

Ruling/ Judgement

The tribunal ruled as follows:

- Since Star Deep has no employees of its own, but makes use of Chevron's
employees, it is not liable to deduct and remit PAYE and that any PAYE
assessment on Star Deep cannot be valid, final and conclusive.

- The withholding tax assessment on Star Deep is not final and conclusive because
the basis of assessment is faulty in law as it failed to comply with the provisions
of PITA. The respondent's BOJ assessment for WHT was set aside and the parties
were directed to reconcile their positions