Tribunal rules in favor of FIRS, orders MTN to pay $72.5 million fine

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Tribunal rules in favor of FIRS, orders MTN to pay $72.5 million fine
Tribunal rules in favor of FIRS, orders MTN to pay $72.5 million fine

The Lagos State Division of the Tax Appeal Tribunal has ruled that MTN Nigeria Communications must pay $72,551,059 in tax default to the Federal Inland Revenue Services (FIRS).

This tax liability covers the period from 2007 to 2017.

However, the tribunal did not find the telecommunications company liable for paying $21,039,807 in penalties and interest on the principal sum.

The decision was handed down by a five-member panel, led by Professor A. B. Hamed, during the judgment delivered in an appeal filed by MTN against the FIRS’s request to settle the tax default.

The matter stemmed from a report by the Office of the Attorney General of the Federation in 2018, which investigated MTN’s Forms A and M transactions during the accounting years from 2007 to 2017.

In a revised report in August 2018, the alleged outstanding import duty and VAT was adjusted to N242.2 billion for Form M-visible transactions, and VAT and Withholding tax (WHT) to $1.284 billion for Form A invisible transactions.

In 2020, the FIRS informed MTN that it had received a report from the Office of the Attorney General of the Federation regarding MTN’s alleged liability to VAT and WHT.

After conducting a review of MTN’s tax and accounting records, the FIRS upheld the alleged tax liability.

In July 2021, the FIRS issued a VAT assessment of $93,590,366 to MTN, comprising $72,551,059 as the principal liability and $21,039,807 for penalties and interest on the principal sum. MTN objected to the assessment, leading to further reviews.

Subsequently, the FIRS issued a revised assessment of $135,697,755 in April 2022.

Although the principal tax liability in the revised assessment was lower than that of the initial assessment, the interest and penalty imposed on it were higher.

MTN objected to the revised assessment, but the FIRS refused to amend it. Dissatisfied with the FIRS’s response, MTN filed an appeal before the Tax Appeal Tribunal.

After reviewing the case and arguments from both sides, the tribunal resolved the issues in favor of the FIRS on the first four issues and in favor of MTN on the fifth issue related to penalty and interest.

Consequently, the tribunal ordered MTN to settle the assessed tax liabilities, while setting aside the penalty and interest.