Tax evasion: Tribunal orders firm to pay N1.7 billion to FIRS

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 Nduka Chiejina (Asst. Editor), Abuja


THE Tax Appeal Tribunal (TAT) has ruled as lawful an assessment in additional tax liability of N1.738,481,875.33 issued to Prime Plastichem Nigeria Limited (PPNL) by the Federal Inland Revenue Service (FIRS).

This is the first major ruling on Transfer Pricing in Nigeria since the introduction of TP rules in 2012.

In 2016, the FIRS reviewed PPNL’s TP documentation and disregarded the CUP analysis applied in the 2013 TP documentation.

The FIRS applied Transactional Net Margin Method (TNMM) to both 2013 and 2014 transactions, and issued an assessment of N1.74 billion. Both parties disagreed on the applicable profit level indicator (PLI) to be adopted in applying the TNMM and the comparables selected in the TNMM analysis.

The assessment was considered the correct income tax which the PPNL should pay on its profit for doing in Nigeria under the provisions of Transfer Pricing Regulation No. 1 2012.

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The tribunal handed down this verdict in Appeal No. TAT/LZ/CIT/015/2017 instituted before it by PPNL, which disputed the FIRS’s additional tax assessment liability.

The tax suit arose following disagreement between PPNL, a firm that “engages in the business of trading in imported plastics and petrochemicals,” and the FIRS on the Transfer Pricing Documentation filed by the PPNL “for 2013 and 2014” concerning the PPNL’s “transaction with a related company, Vinmar Overseas Limited (VOL)”.

A statement from the FIRS yesterday said the PPNL “adopted the Comparable Uncontrolled Price (CUP) for its filing, the FIRS insisted that the Transactional Net Margin Method (TNMM) was the correct tax assessment tool to apply in this particular case.”

Responding to the arguments adduced against it by PPNL at the tax tribunal, the FIRS stated that PPNL “misrepresented information” to the Service “by stating that Vinmar International Limited (VIL) only engages in information collection and liaising activities on one hand, and on the other hand, its submission to the Tribunal stated that VIL engages in sales of similar products as itself the Appellant.”