Tribunal orders firm to pay FIRS N1.7 billion correct income tax

The Lagos Zone of the Tax Appeal Tribunal has ruled an assessment in additional tax liability of N1.7b 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 No.1 2012.

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

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

While the PPNL “adopted the Comparable Uncontrolled Price (CUP) for its filing, 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 against it by PPNL at the tax tribunal, 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, its submission to the Tribunal stated that VIL engages in sale of similar products as the appellant.”

According to the FIRS, the information indicated that “the controlled transactions with VIL were not at arm’s length” as claimed by PPNL, hence it could not serve as a basis for calculating the PPNL tax liability and reliefs sought by the firm at the tax tribunal.

Adducing documentary evidence to support its claims, FIRS told the tribunal that PPNL’s assertions “in this matter is peppered with approbation and reprobation” and amounted to speaking from “both sides of the mouth” because PPNL itself admitted in oral and documentary evidences before the tribunal that its “use of CUP method in 2013 was done in error” hence the appellant “changed the method from CUP to TNMM in 2014.”