TAT RULES ON TAX ON NON-RESIDENT COMPANY AND STAMP DUTY

On October 18, 2022, the Tax Appeal Tribunal issued a decision regarding the non-resident company’s payment of tax and stamp duty between New Skies Satellites B.V (Appellant) and Federal Inland Revenue Service (Respondent)

Background
The appellant filed the appeal on August 26, 2021, in an effort to overturn the respondent’s decision, which was stated in letters dated July 6 and July 2021.
The Appellant was formed in the Netherlands and is a tax resident there. Its business is to distribute satellite capacity around the world using its network of communication satellites (in geostationary orbit about 36,000 miles from earth). The satellite sends reliable signals (audio, video, and/or data) over long distances between different geographical locations. 
The Respondent, on the other hand, is a Federal Government of Nigeria agency charged with the statutory duty of administering all federal taxes in Nigeria.
In March 2021, the Nigeria Broadcasting Corporation (NBC) asked the Appellant to confirm its eligibility to benefit from the Respondent’s tax concessions under the Nigeria-Netherlands Double Taxation Agreement/Treaty (DTA or DTT).

The Appellant then requested DTA Relief from the Respondent in a letter dated May 21, 2021. The Respondent asked the Appellant for additional documents. In its response letter dated July 6, 2021, the Respondent ruled that the Appellant was ineligible to benefit from the tax concessions under the DTA after reviewing the Appellant’s documents.

The Respondent reasoned that because the preamble to the re-executed contract between the Appellant and NBC named a Nigerian entity – SES Nigerian Limited (SNL), which was a related party of the Appellant – SNL constituted a permanent establishment for the Appellant in Nigeria under Articles 5 of the DTA, the Respondent ruled that the Appellant would be liable to Nigerian tax.
The Appellant clarified to the Respondent that the inclusion of SNL in the Agreement’s preamble was done at NBC’s request to comply with the Federal Government policy, and that SNL did not execute or perform any part of the contract.
Earlier in 2016, the appellant entered into a satellite service agreement with a Nigerian company, Cable Channel Network Limited (CCNL). NBC granted CCNL a licence to procure satellite capacity and related transmission services for the implementation of Nigeria’s digital switchover. Under the terms of the contract between the Appellant and CCNL, NBC guaranteed CCNL’s financial obligations to the Appellant.
NBC terminated CCNL’s contractual obligations in July 2018. In accordance with a Federal Government Executive Order requiring all ministries, departments, and agencies of the Federal Government (MDAs) to include indigenous companies as parties to government contracts with foreign service providers, NBC requested that a Nigerian Company be made a party to the agreement. As a result, the contract signed with NBC named SNL, a related company of the Appellant, as a party.
Issues for determination
The Respondent’s Counsel formulated three issues for determination in the Appeal as follows:
i. Whether the conditions under which a company is deemed to have a Permanent Establishment under Article 5 of the Avoidance of Double Taxation. Agreements (Between the Federal Republic of Nigeria and the Kingdom of the Netherlands, have been sufficiently met in the circumstances of this case to subject the income of the Appellant to tax in Nigeria.
ii. Whether the case of the Appellant offends the rule of “exclusion of oral evidence by the documentary “as entrenched in S.128 of the Evidence Act; and
iii. Whether the Service Agreement, being a dutiable instrument, the Appellant is liable to pay stamp duties as mandated by law. 
On the other side, four issues were distilled for determination by the Appellant’s Counsel, to wit:
i. Whether the mere inclusion of SNL in the re-executed contract between NBC and the Appellant constitutes a PE for the Appellant;
ii. Whether the provision of racks and servers by Computer Warehouse Group (‘CWG’)- an independent entity acting in the ordinary course of its business, constitutes a PE for a foreign entity such as the Appellant.
iii. Arguendo, what is the effect of the Appellant acquiring a PE in Nigeria due to SNL or CWG;
iv. Whether the Stamp Duty Act (as amended) is applicable to documents executed by NBC, a government agency.
Determination of the Tribunal
As stated earlier, the Appellant and Respondent submitted four (4) and three (3) issues for determination, respectively. However, in our view, only two issues call for determination in this Appeal, to wit:
Issues One

 Whether the Appellant, a non-resident company, is deemed to have a permanent establishment in Nigeria and therefore liable to tax in respect of the income derives from Nigeria. 
(a) When a Non-Resident Company will not be deemed to have a permanent establishment in Nigeria. This, the appellant had the onus to prove by evidence that CWG was a broker, general commission agent or any other agent of an independent status acting in the ordinary course of business and
(b) When an independent agency is created and deemed to constitute a permanent establishment for a non-resident company   
‘’The Tribunal, therefore, finds that the Appellant had at its disposal, an office premises provided by CWG for the provision of uplinks and transmission services to the Appellant’’ Consequently, we hold the view that the Appellant acquired permanent establishment as contemplated under Article 5 of the DTA and is, therefore, liable to tax in Nigeria in accordance with the prescription of Article 7 of the DTA.
Issues TwoWhether the Service Agreement, being a dutiable instrument, is not liable to stamp duties under the Stamp Duties Act (as amended) in the circumstances of this case.

The TAT states that Article 5 (6) of the DTA deals with two contrasting situations, and these are
The Stamp Duties schedule under the general exceptions provides thus
(i) All instruments on which the duty would be payable by the Government,
(ii) All instruments on which the duty would be payable locally by the Government in Nigeria or any of the departments therefore
’In the extant case, NBC is the party to whom an obligation was owed. It is also the party to whom the promise was made by the contract. If NBC was a beneficiary  of the service, then it stands to reason that NBC, consistent with the provision of section 13  (3) of the SDA, ought to be liable to pay the chargeable stamp duty on the service agreement’’  It is therefore this Tribunal’s view that the Appellant is not liable to pay the stamp duty chargeable in respect of the transaction evidenced by the Service Agreement.
For the avoidance of doubt, the Tribunal holds that the Appellant has a taxable presence in Nigeria and is, therefore, liable to tax in Nigeria in line with the provisions of Article 7 of the DTA. On the other hand, the Tribunal holds that the Appellant is not liable to stamp duty chargeable on the contract for reasons detailed above. Consequently, this Appeal succeeds in part.