The Tribunal of Nigeria’s Tax Appeal has issued decisions on August 26, 2013 regarding two non-resident taxpayers. The issue was if in Nigeria their taxable turnover could be determined by cutting amounts that they give payment to Nigerian subsidiaries involve supporting local performance of their contracts.
Nigeria’s Federal Inland Revenue Service disapproved the deductions for payments and issued judgment notices to each company. The companies appealed on the fields that payments are not part of the turnover of a foreign resident company for Nigerian tax purposes. As the affiliates in question had paid corporate tax on the recharges received, economic double taxation would arise unless a deduction was accepted for the recharge by the foreign resident companies.
In both cases, in respect of the tax authorities the Tax Appeal Tribunal find that the non-resident companies could not reduce the payments in calculating their corporate tax on a deemed profit basis. As required by section 55 of CITA, the companies had failed to submit a corporate tax return with accompanying financial statements. This section gave the FIRS the right to impose tax on the basis of a fair and reasonable turnover percentage attributable to the fixed base of the foreign resident company in Nigeria.
