Tax Appeal Tribunal affirms that statutes supercede any contractual arrangements

   According to an update by Pricewaterhousecoopers,

    In December 2015, the Tax Appeal Tribunal (TAT) ruled that an upstream company can deduct capital allowances (CA) on capital expenditure incurred in line with the Petroleum Profits Tax Act (PPTA), regardless of whether or not such costs have been approved by a counter party under a contractual agreement. This ruling was issued in a case brought before the TAT by an International Oil Company (“IOC” or “Appellant”) against the Federal Inland Revenue Service (“FIRS” or “the Respondent”).

This decision provides some clarity on the long standing debate on whether tax deductibility is dependent on cost recoverability for upstream oil companies in Nigeria. While both concepts are separate and should be treated distinctly, the complex nature of contractual agreements in Nigeria’s upstream industry can make the lines between both very blurry.


  
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