The Tax Appeal Tribunal, Lagos Zone 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) as the correct income tax which the PPNL should pay on its profit for doing business in Nigeria under the provisions of Transfer Pricing Regulation No1 2012.
\nDetails of the judgment released by Dr.Abdullahi Ismaila Ahmad, the FIRS Director, Communications and Liaison Department says the tax tribunal handed down this verdict in Appeal No. TAT\/LZ\/CIT\/015\/2017 instituted before it by PPNL, which disputed the FIRS\u2019s additional tax assessment liability.
\nThe tax suit arose following disagreement between PPNL, a firm that \u201cengages in the business of trading in imported plastics and petrochemicals,\u201d and the FIRS on the Transfer Pricing Documentation filed by the PPNL \u201cfor 2013 and 2014\u201d concerning the PPNL\u2019s \u201ctransaction with a related company, Vinmar Overseas Limited (VOL)\u201d.
\nWhile the PPNL \u201cadopted 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.
\nResponding to the arguments adduced against it by PPNL at the tax tribunal, the FIRS stated that PPNL \u201cmisrepresented information\u201d to the Service \u201cby 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.\u201d
\nThis \u201cmisinformation\u201d, according to the FIRS, indicated that \u201cthe controlled transactions with VIL were not at arm\u2019s length\u201d as claimed by the PPNL, hence cannot serve as a basis for calculating the PPNL tax liability and the reliefs sought by the firm at the tax tribunal.
\nAdducing documentary evidence to support its claims, the FIRS told the tribunal that the PPNL assertions \u201cin this matter is peppered with approbation and reprobation\u201d and amounted to speaking from \u201cboth sides of the mouth\u201d because PPNL itself admitted in both oral and documentary evidences before the tribunal that its \u201cuse of CUP method in 2013 was done in error\u201d hence the Appellant \u201cchanged the method from CUP to TNMM in 2014.\u201d
\nIn a submission which appeared to lend credence to a recent revelation by the Executive Chairman FIRS, Mr. Muhammad Nami, that multinationals operating in Nigeria have perfected a complex web of profit-shifting, especially in transactions linked with offshore corporate entities, the FIRS averred that \u201cactual profits reported by the Appellant (PPNL) were well below what comparable entities operating at arm\u2019s length would report.\u201d
\nIn what may be seen as modus operandi adopted by tax evading corporate organisations in the country, the FIRS averred before the tribunal that \u201chaving professionally reviewed the benchmarking analysis\u201d of PPNL, it found that the firm adopted the \u201cstrategy of cherry-picking comparables\u201d and the Service \u201cdiscovered that the company failed to use the appropriate profit-level indicators (PLI) thereby producing wrong arm\u2019s length prices for the controlled transactions.\u201d
\nIn its judgment, the tribunal averred that \u201cthe only point of divergence between the Appellant and Respondent was the appropriateness of using Net Profit or EBIT\/Operating Revenue as Profit Level Indicator (PLI) or Gross Profit\/Operation Revenue for the purpose of TNMM.\u201d
\nAfter a detailed consideration of \u201cthe facts of the case\u201d as adduced by both PPNL and the FIRS, the five-member tax tribunal chaired by Prof, A.B. Ahmed, resolved all five issues raised in favour of the FIRS, submitting that \u201cthe appeal filed by the Appellant is hereby dismissed in its entirety.\u201d<\/p>\n","protected":false},"excerpt":{"rendered":"
The Tax Appeal Tribunal, Lagos Zone 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) as the correct income tax which the PPNL should pay on its profit for doing business in Nigeria under the provisions of Transfer […]<\/p>\n","protected":false},"author":7,"featured_media":14404,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[4,7],"tags":[1136,375,99],"class_list":["post-24890","post","type-post","status-publish","format-standard","has-post-thumbnail","category-business","category-news","tag-evasion","tag-tax","tag-tribunal"],"_links":{"self":[{"href":"https:\/\/everyday.ng\/index.php?rest_route=\/wp\/v2\/posts\/24890","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/everyday.ng\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/everyday.ng\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/everyday.ng\/index.php?rest_route=\/wp\/v2\/users\/7"}],"replies":[{"embeddable":true,"href":"https:\/\/everyday.ng\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=24890"}],"version-history":[{"count":0,"href":"https:\/\/everyday.ng\/index.php?rest_route=\/wp\/v2\/posts\/24890\/revisions"}],"wp:attachment":[{"href":"https:\/\/everyday.ng\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=24890"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/everyday.ng\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=24890"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/everyday.ng\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=24890"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}