Nigerian Tax Compliance Review Exercise: seeking clarity for Members

21 June 2024

A year ago, the Nigerian government’s Federal Inland Revenue Service, known as FIRS, began a retrospective tax compliance review exercise, sending demand letters to a number of tanker owners whose vessels had called in Nigeria between 2010-2019.

INTERTANKO Members own, operate and manage more than 3,700 ocean-going crude, chemical, product and gas tankers, so it was not surprising that many were in receipt of such letters. Over the past year, Intertanko therefore engaged directly with the FIRS, to seek clarity on the taxes alleged to be due and to better understand the situation.

Through this engagement and interventions at public stakeholder forums, the association raised member concerns about their exposure to taxes put into effect with no proper prior notification, as well as the potential consequences for future calls to Nigeria.

This resulted in concessions and various waivers of interest and penalties for the settlement of alleged taxes, made by specific dates, with all concessions ending on March 31, 2024.

It is not possible to know the number of owners who have taken advantage of the concessions and the FIRS will not disclose who has settled as this is confidential information.

However, we do know that the concessions, in addition to negotiated settlement figures significantly below the original demands, have afforded some owners a degree of certainty about risk exposure for future calls to Nigeria, in relation to tax liabilities under this compliance review exercise.

One year on, and the issue has not been resolved.

While the FIRS has provided some clarification on the demands made this time, it is unclear what will happen now that the concessions period has ended and what other taxes may be considered due, either historically or in the future.

Unpredictable tax landscape
What is clear, however, is that these demands and this ongoing exercise are not limited to tankers and this may not be the only compliance review exercise the FIRS undertakes. In the future, all operators will need to carefully consider the specific requirements to register and file tax returns with the FIRS if operating in the country.

Given the increasing complexity and high level of current uncertainty of calling in Nigeria, Intertanko members are protecting themselves.

Members calling in Nigeria are putting clauses into their contracts to ensure that taxes are covered by charterers ordering the loading of cargoes from Nigeria. Other members are avoiding the region until there is clear guidance on a practicable tax regime from the Nigerian authorities.

We look to the Nigerian government to give the international shipping industry the reassurance it needs to continue calling in Nigeria.

Selena Challacombe – Legal Counsel (selena.challacombe@intertanko.com)

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