SES, and its Dutch subsidiary New Skies Satellite, have lost a Nigerian tax tribunal over VAT payments.

In Nigeria, VAT is chargeable on the supply of goods and services. SES/New Skies was supplying satellite bandwidth to telco Vodacom Business Nigeria, and Nigeria’s Federal Inland Revenue Service (FIRS) brought an action despite New Skies being a Dutch-based non-resident company.

Accountants KPMG, in a report on the matter, say that New Skies did not charge VAT to Vodacom, and when tax was demanded prompted Vodacom to appeal to the tax tribunal to determine whether the satellite bandwidth was a taxable transaction.

KPMG state: “Vodacom argued that NSS’ supply of bandwidth was a service provided outside Nigeria; and that based on the VAT Act, services provided by an NRC would only qualify as ‘imported services’ if they are rendered in Nigeria. Thus, the Appellant’s position was that the VAT Act does not apply to the transaction, given that NSS provided its services outside Nigeria.”

The appeal failed. However, KPMG Nigeria in its comment on the case, say: “Our view is that the primary matter in dispute, which was whether a service provided offshore by an NRC should be liable to VAT in Nigeria, was not addressed by the Tribunal. Although the Tribunal’s reference to the destination principle (relied upon by the FIRS) suggests that it is cognisant of the primary issue at hand, it did not show if and how it relied on it to reach its decision.”

KPMG concluded: “In the circumstance, we will have to wait for the ruling of a higher court on the subject matter. Meanwhile, taxpayers with similar arrangements would be well-advised to start reviewing their transactions to evaluate their potential exposure.”

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