TAX VERDICT: Lagos Tribunal Orders MTN to Pay $72.5 Million in Back Taxes

The Tax Appeal Tribunal of Lagos State has issued a ruling, mandating MTN Nigeria Communications to remit $72,551,059 in unpaid taxes to the Federal Inland Revenue Service (FIRS) for the period spanning 2007 to 2017. Nevertheless, the tribunal absolved the telecommunications giant from paying an additional $21,039,807 in penalties and interest on the principal sum.

A five-member panel led by Professor A. B. Hamed delivered the verdict recently while addressing a case numbered TAT/LZ/VAT/075, initiated by MTN Nigeria Communications in response to the FIRS’s demand for the unpaid taxes.

As per the details outlined in the appeal, the sequence of events commenced on May 10, 2018, when the Office of the Attorney General of the Federation published an investigative report into MTN’s Forms A and M transactions. This report covered the financial years from 2007 to 2017.

Subsequently, in an amended report dated August 20, 2018, the Office of the Attorney General of the Federation adjusted the alleged outstanding amount in terms of import duties and Value Added Tax (VAT) to the tune of N242.2 billion for Form M-visible transactions. In the same report, the section related to VAT and Withholding Tax (WHT) was adjusted to $1.284 billion for Form A-invisible transactions.

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

MTN contested the initial assessment, leading the FIRS to conduct a further review of the evaluation. Consequently, on April 14, 2022, the FIRS issued a revised assessment of $135,697,755 million to MTN.

Although the principal tax liability in the revised assessment was lower at $47,776,210 million compared to the initial assessment of $72,551,059 million, the interest and penalties imposed by the FIRS on the revised assessment amounted to $87.900 million, exceeding the $21,039,807 million imposed on the initial assessment.

After MTN raised objections to the FIRS’s revised assessment on May 13, 2022, the FIRS, in a letter dated June 16, declined to amend the revised assessment.

Following a thorough examination of all the documents submitted by both parties and citing various legal precedents, the tribunal concluded, “In the final analysis, it is the decision of the Tribunal that issues one to four discussed above are all resolved in favor of the Respondent, and the Appellant is, therefore, ordered to settle the assessed liabilities accordingly. However, issue five concerning penalty and interest is resolved in favor of the Appellant and is, therefore, set aside by this Honorable Tribunal. This is our Judgment.”

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