A subsidiary of an indigenous Nigerian oil production company, Oando PLC, recently lost a stamp duty case in the Tax Appeal Tribunal.
This would be unfortunate in any event, but the reasoning in the case, and even the behaviour of the tax authority (the Federal Inland Revenue Service (FIRS) at the time) causes great concern. We are not aware of many other cases on Nigerian stamp duty, but we expect that these will become more common now that the Nigeria Tax Act has become effective. Some of the technical issues arising from the Stamp Duties Act may not be important for the future, now that the Nigeria Tax Act has taken effect. But the issues on the powers of the tax authority, the behaviour of the tax authority and the rigour of analysis applied by the TAT will remain important.
Facts and Background
The Oando group acquired shares in some Nigerian companies in 2012 and 2014, from Conoco Philips. These companies in turn owned Nigerian Oil Mining Licences.
The shares were acquired by two subsidiaries of Oando PLC, registered in the Netherlands. For some reason, the assessments were made on Oando Oil Ltd, which we assume to be a subsidiary of Oando PLC.
What was acquired was shares in limited companies. Nigeria’s Stamp Duties Act provided for stamp duty on acquisitions of shares at 1.5% of the consideration, but that was over-ridden by General Exemption 13, which exempted all documents relating to the transfer of stocks and shares from stamp duty. As an aside, the Stamp Duties Act has now been replaced by the Nigeria Tax Act 2025, which also exempts documents relating to the transfer of shares.
The Revenue Mobilization Allocation and Fiscal Commission (RMAFC) investigated oil and gas companies, to monitor revenue accrued to the Nigerian Government’s Federation Account. This investigation revealed that Oando Oil Ltd (among other companies) had allegedly failed to pay Stamp Duty due on acquisition of Oil Mining Leases. The matter was referred to the FIRS to recover the tax. FIRS issued an assessment on 24 June 2024, demanding stamp duty of USD 24.75 million. Not surprisingly, the company objected and later appealed to the Tax Appeal Tribunal (TAT).
The point was not mentioned or discussed in the case, but we expect that the Oando group paid “ministerial consent fees” when it acquired the Conoco Phillips subsidiaries which owned the Oil Mining Leases. This follows from the 2012 High Court case between Moni Pulo Ltd and Brass Exploration Unlimited, and 2014 Guidelines for obtaining Minister’s Consent to the assignment of interest in oil and gas assets. These clarify that consent is required even for the transfer of shares in a company which owns an OML. Ministerial Consent was obtained on 18 June 2014. The fee at that time was between 1% and 5% of the value of the transaction and may thus have been more than the stamp duty assessed by FIRS. If so, Oando paid a considerable amount of tax on the transaction, and it did not default on its obligations as imposed by law, nor did it adopt an artificial method to avoid paying taxes.
Decision
The TAT found in favour of FIRS and agreed that Oando must pay stamp duty of USD 24.75 million, plus a penalty of USD 2.475 million (that is, 10% of the duty), and interest up to 24 June 2024 of USD 63 508 099. Further, additional interest at 10% per year, calculated on the stamp duty of USD 24,75 million, continues to arise until the tax is paid.
Reasoning
The TAT decided that:
i). FIRS was not precluded from assessing the stamp duty, even though more than 5 years had passed since the acquisition of the assets. S 114 Stamp Duties Act stated that proceedings for the recovery of stamp duty could be commenced within 5 years after the offence leading to non-payment was committed. This argument was dropped by Oando in its final written address, but the TAT considered the issue anyway. The TAT chose to apply s 35(2) of the FIRS Establishment Act (FIRSEA) instead. It did so by applying s 68 of FIRSEA, which states that the FIRSEA takes precedence over other laws regarding administration, assessment, collection and enforcement of taxes.
(ii). The share purchase agreements were not “mere transfers” of shares, but “purchase and sales of shares agreements,” and therefore did not qualify for the exemption from stamp duty.
(iii). The company argued that it was not a party to the agreements and therefore could not be assessed to stamp duty. The TAT stated that it could not be certain that Oando Oil Limited was different to the parties named in the contract. The TAT went on to say that the company acquired the OMLs, directly or indirectly, and was therefore liable for the stamp duty.
(iv). A penalty of 10% of the unpaid duty, per annum, is due. This was as stipulated in s 23(1) Stamp Duties Act. From the report of the case, it seems that Oando did not argue about the penalties and interest imposed. The TAT confirmed a penalty of USD 2.475 million, and accrued interest to 24 June 2024 of USD 63 508 099.32, plus further interest of 10% of USD 24.75 million per annum until the duties have been paid. It appears that FIRS argued that interest should be imposed under the Nigeria Tax Administration Act 2025, at the prevailing Monetary Policy Rate of the Central Bank of Nigeria. However, no evidence was presented to the TAT about what the Monetary Policy Rate is, so the TAT declined to award that interest.
Comments
In our view, this entire case is highly unsatisfactory. The work done by FIRS looks inadequate, and assessments made in what looks like clear breach of the law. It may be that the company could have helped its case by better preparation and presentation of information, considering some of the comments made by the TAT. The analysis by the TAT appears to be superficial and indicates a desire to find in favour of the tax authority by any means it can. This case also shows the dangers arising from other government agencies getting involved in tax matters, and the FIRS not then critically analysing the information it is given.
Name of the company assessed
The assessments were issued to the wrong company. Most tax legislation allows for this sort of error to either be corrected or condoned. An example of this is in s 42 of the Nigeria Tax Administration Act 2025. A mistake in the name of a company assessed does not invalidate an assessment. There was a similar provision in the Companies Income Tax Act. However, we have not been able to find anything in the Stamp Duties Act or the FIRSEA that permits or condones an assessment being issued to a wrongly named company.
The FIRS has understandably been given sweeping powers to recover taxes owed to it. But these powers have limits, and the FIRS (or the Nigerian Revenue Service now, NRS) can surely be expected to try to identify the name of the person it believes to owe tax. Oando Oil Ltd is not a name that appears as a party to any of the agreements that were referred to by FIRS, and it seems poor practice and procedure by FIRS to issue the assessments to the wrong company.
We therefore conclude, based on the law at the time of the transactions and at the time the assessments were issued, that the assessments were invalid.
Time limit
We agree with the TAT that the provisions of the FIRSEA take precedence over the Stamp Duties Act. However, the provisions of the FIRSEA have limits on them. We accept that FIRS had the right to consider the matter, and to endeavour to collect taxes where possible. This is clear from s 35 FIRSEA. The limitation came in s 34(2) FIRSEA. The FIRS could assess a person who had not paid tax due to being under-assessed. But a demand for payment could not be made more than 5 years from the date of the underassessment, unless the underassessment was caused by the production of a document or the making of a statement which was untrue in any material particular. This surely places a burden on the FIRS to show that an untrue statement made, or document produced, by the taxpayer led to the under assessment. There is no indication in the case that the FIRS made any attempt to show this, nor was it asked to do so by the TAT.
In our view, the assessment was made after the expiry of the time limit, and it was therefore invalid.
The FIRS correctly expects taxpayers to endeavour to pay the correct amount of tax, at the right time. It is right that the FIRS also scrupulously adheres to time limits and other statutory and procedural requirements.
As a further aside, there have been many changes to Nigerian tax law recently, meaning that some of the issues in this case are no longer relevant for future transactions. The Nigeria Tax Administration Act contains a time limit for assessing taxes, which is 6 years from the time of an original assessment, or later if an audit of the taxpayer’s taxes has commenced before the expiry of the six-year limit. If there is deliberate misstatement by a taxpayer, then an assessment can be made at any time. However, this requires the taxpayer to make a deliberate understatement, and the tax authority will need to assert that this was the case.
Exemption from stamp duty
General exemption 13 listed in the Schedule to the Stamp Duties Act exempted from stamp duty “all documents relating to the transfer of stocks and shares.” We find it difficult, with respect, to understand the reasoning presented by the TAT in deciding that the exemption did not apply to these transactions. The Oando companies purchased shares in other companies. Inevitably, an acquisition of the shares was a form of indirect acquisition of the assets owned by those companies. But the share purchase agreements were not agreements for the purchase of those underlying assets.
A transfer of shares can take place in several ways. The shares can be donated or gifted. They can be offered as security. They can be forfeited, if that security is called upon, for example. Or they could be purchased, which is probably the most common form of transfer of shares. The shares in question were not listed on a stock exchange, so there was no need, or even possibility, for a transaction on a stock exchange. A sale and purchase is just one method of transferring shares. Transfer, in this context, means to make over the possession or property or a right to another person (Concise Oxford Dictionary). This is what happened here. The Conoco Phillips company which owned the shares transferred them, for consideration, to the Oando group companies named in the agreements. The same dictionary also defines “purchase” as the acquisition of property by personal action and not by inheritance. Transfer is a broader term than purchase, and a purchase is one of several methods by which a transfer can take place.
As we see it, this was a purchase of shares for a consideration, and this is a form of transfer. It seems that the TAT was trying too hard to find a basis on which to find for the FIRS and used a mis-leading distinction between two words.
We conclude that the transactions were exempt. It follows that Oando had not avoided or evaded any stamp duty and had not made any untruthful declarations.
Penalties
We find it difficult to understand the calculations of penalties and interest.
The Stamp Duties Act provided for a penalty of 20 Naira per instrument. A further penalty was levied by way of interest, at the rate of 10% per year, but the interest cannot exceed the duty payable. There is also a further penalty equal to the duty unpaid (s 23(3)), but this only applied if the person was convicted of an offence, which was not the case here.
We understand that there were three agreements, so the penalty should have been NGN 60. The 10% penalty is not stipulated in the Stamp Duties Act. The Nigeria Tax Administration Act provides for a penalty of 10%, plus interest at the prevailing CBN Monetary Policy Rate, but this Act was not in force at the time.
The TAT appears to have applied both the Stamp Duty Act and the Nigeria Tax Administration Act. We do not understand how the Nigeria Tax Administration Act can apply in this case. The transactions took place in 2012 and 2014, and the assessment was issued in 2024. All of which took place long before the Nigeria Tax Administration Act took effect, which was possibly on 26 June 2025 (although the Chairman of the FIRS, and more recently the President, have said that it took effect on 1 January 2026).
So, possibly, the Nigeria Tax Administration Act could affect the interest payable after it took effect. But we do not see how it can impose penalties for any period before June 2025, and it is rather alarming that the TAT even considered it. The interest (at least for periods before the Nigeria Tax Administration Act came into effect) must be based on a combination of the Stamp Duties Act and the FIRSEA.
It might be that the FIRSEA should apply, although this does not seem to have been argued for or considered by the TAT. FIRSEA would apply a penalty of 10% of the duty, plus interest at the prevailing LIBOR rate, or the CBN minimum rediscount rate if higher, plus a spread determined by the Minister. If the TAT was not aware of these interest rates, we suggest it should have asked the parties for additional evidence.
So, applying a penalty of 10% of the duty might be correct, but does not appear to have been articulated by the FIRS. If the duty unpaid was USD 24.75 million as asserted by FIRS, and if the duty was unpaid from 2012 to 2024 and interest of 10% applied to the duty only (and not to the penalty), we would have expected the total interest to be approximately USD 29.7 million. It can also be argued that this should be limited to USD 24.75 million. In any event, it seems to us that the interest charged should have been much less than the amount of USD 63.5 million that was actually assessed.
Conclusion
With due respect to the TAT, it seems to us that the case has been incorrectly decided on multiple grounds. The transaction seems clearly exempt from stamp duty. The assessment was issued after the time limit had expired and was issued to a company that was not a party to the transactions. And the penalty and interest have been greatly overstated.
Tax law is complicated, and it is inevitable that differences of opinion will arise between taxpayers and tax authorities. It is for this reason that the TAT is expected to consider cases impartially, based on a rigorous analysis of the law. It is also expected that the tax authority (FIRS in this case) will apply the law as it has been drafted and apply it to the facts that are presented or exist. The quality of work done in this case by both the FIRS and the TAT fall short of this standard, in our view, and this creates a risk that Nigeria will be seen as a presenting a higher tax risk than it should do, with consequential negative effects on investment in the country.
We hope that the case has been appealed, and that the Federal High Court will over-turn this judgement and rule in a manner which is consistent with the law.
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