Tribunal orders Halliburton consortium to pay FIRS N5.75billion tax Liabilities

The Abuja division of the Tax Appeal Tribunal (TAT) on Wednesday ordered TSKJ Nigeria, one of the contracting partners in the Nigeria Liquefied Natural Gas (NLNG) project, to pay N5.14 billion (about $35,938,087 dollars) as tax liabilities to the Federal Inland Revenue Service (FIRS).

Acting Chairman of the tribunal, Nnamdi Ibegbu, a senior advocate of Nigeria (SAN), gave the order in an appeal by TSKJN challenging the FIRS Tax assessments in a contract for the construction of NLNG plant.

The company (TSKJN), which filed three separate appeals with suits No TAT/ABJ/APP1010/2008, TAT/ABJ/APP/006/2006 and TAT/ABJ/APP/017/2010 before the tribunal, was also ordered to pay the revenue service N300,000 as cost of the three appeals decided against it.

In the appeal to the Tribunal, the company challenged FIRS’ refusal to amend its assessments for 1997-2002 and additional assessment raised by the Service in the sum of $550,556.74 tax liabilities for 2008 and 2009 tax years, among others.

In the first ruling on assessment for 1997-2002, the tribunal upheld FIRS assessment that the company was liable to pay $16,688,267 as tax. 

In the second ruling, the tribunal said the assessment for 2006, 2007, as well as the additional assessment for 2008, the FIRS assessment of $ 19.3million was in order. 

In the two suits, TSKJ Nigeria Limited, a subsidiary of TSKJ International, was awarded contract by the Federal Government on the Nigeria LNG project, which offered services to TSKJ II, but was not party to the NLNG contract.

In trying to fulfil its tax obligations for the years in question, TSKJ II filed its tax returns, under Section 26 of Companies Income Tax (CITA), but made deductions on expenses incurred by TSKJ Nigeria, against FIRS approval. 

The FIRS had argued that it was wrong for such deductions to have been made since TSKJ II did not file its audited accounts, but filed under Section 26 of CITA, deductions in favour of TSKJ N (Nigeria), a Nigerian subsidiary. 

The section gives the FIRS Board discretionary powers to allow 80 per cent turnover as expenses/costs, and assess the remainder of 20 per cent of turnover at 30 per cent.

Statutorily, companies are required to file returns based on audited accounts, but TSKJN filed its returns for the years in question based on the Section 26 of CITA, with Turnover as basis for assessment.

The FIRS said the additional assessment of the company’s tax was also based on its refusal to file returns based on its audited accounts, in accordance with the law. 

“On resolving this issue in favour of the respondent, it is not disputed that the Appellant filed its returns on turnover basis. So under that basis, it is the respondent who defines what amount is fair and reasonable percentage of the turnover,’’ the appeal tribunal Chairman said.

“It is undisputed that 80 per cent covers all the costs incurred by the taxpayer when using the Turnover Basis of Assessment. There is no provision of the law which makes subcontract allowable deduction,’’ he added.

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