Nigeria: Value of crude oil for petroleum profits tax | KPMG | GLOBAL

Nigeria: Value of crude oil for petroleum profits tax purposes

Nigeria: Value of crude oil for petroleum profits tax

The Tax Appeal Tribunal, Lagos, addressed what was the appropriate pricing mechanism for determining the value of crude oil for purposes of the petroleum profits tax when there had been a memorandum of understanding (MOU) between Nigeria’s federal government and international oil companies.


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The MOU was agreed to in 2000, and it provided a pricing mechanism that was to be used in determining the value of crude oil for a minimum of three years. The MOU expired in 2002. There was no new agreement on the price of crude oil. 

A subsequent agreement, however, provided a realisable price to be adopted between 2008 and 2010. However, the Federal Inland Revenue Service took the position that, absent a new regime, the provisions of the Petroleum Profits Tax Act were to apply and that the price posted in section 23 of that law was the value to be used.

The taxpayer in this case computed its petroleum profits tax for 2007 and 2008 using the agreed realisable price. The tax authorities issued deficiency notices. 

The Tax Appeal Tribunal concluded that the MOU was still valid in 2007, and that the agreed realisable price was valid and was the applicable pricing methodology for 2008. 


Read a February 2016 report [PDF 1.8 MB] prepared by the KPMG member firm in Nigeria: Valuation of Crude Oil for Petroleum Profits Tax Purpose in 2007 and 2008 tax years

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