Exclusive: Details of How MultiChoice Nig. Ltd., MultiChoice Africa Holdings BV Sorted out N1.8trn Tax Issues With FIRS

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Facts have emerged over how MultiChoice Nigeria Limited, MCN, and MultiChoice Africa Holdings BV, and the Federal Inland Revenue Services, FRIS, settled the N1,822,923,909,317 (One Trillion, Eight Hundred and Twenty-two Billion, Nine Hundred and Twenty-three Million, Nine Hundred and Nine Thousand, Three Hundred and Seventeen Naira) tax dispute between them.

In a confidential deal, the federal agency finally settled for N35,400,000,000 (Thirty five billion, four hundred million Naira only) as tax due from the two companies over the period 2011 to 2020.

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The resolution of the tax war was contained in the terms of settlement drafted on 21 December 2023 and filed before Justice Lewis Allagoa of the Federal High Court, Lagos, and signed by all the parties between January 12 and 15, 2024

Despite snippets of the deal published by one or two media houses early last year, FIRS and the two companies agreed on confidentiality. They said:

“Each of the parties shall at all times keep confidential and shall not disclose or divulge to any third party any information relating to the business or affairs of the other party, the contents of this agreement or any agreement entered into pursuant to this agreement….”

At the height of the tax dispute, the House of Representatives had mandated its Committee on Finance to investigate the alleged non-remittance of tax revenue by the South African entertainment Multichoice Group.

The resolution of the House followed the adoption of a motion titled “Need to investigate the alleged unremitted N1.8tn and $342m tax revenues owed the Federation by Multichoice Group.”

The sponsor and member representing Bida/Gbako/Katcha Federal Constituency, Niger State, Saidu Abdullahi, said the power of the House to probe Multichoice is derived from Sections 88 and 89 of the 1999 Constitutions (as amended).

Abdullahi noted that the FIRS had engaged a consultant in 2021 under a Whistleblowing contract to carry out an audit of the tax obligations of Multichoice Nigeria and MultiChoice Africa to ascertain the company’s tax indebtedness to the country. The lawmaker said that their findings led to a back audit and investigation carried out by the FIRS from 2011 to 2020.

This paper can reveal authoritatively how the FIRS and the two companies negotiated out of court with the former receiving only N35.4 billion from the N1.8 trillion tax assessment.

In the terms of settlement drafted on 21 December 2023 and filed before the Federal High Court, Lagos and signed by all the parties between January 12 and 15, 2024, FIRS withdrew the Best of Judgment (BOJ) Assessment Notices dated April 7, 2021, and June 15, 2021, against MCN and MAH and replaced them with a new Assessment Notice.

           “The new assessment notice shall be in the sum of N35,400,000,000.00 (Thirty-five billion, four hundred million Naira) covering the period of April 1, 2010, to March 31, 2023,” the term of settlement read (see court papers below).

However, the parties agreed “that this Terms of Settlement is neither an admission of guilt nor a concession by the Parties that their respective claims are not well founded.”

In a six-page annexure to the terms of settlement, the parties said:

“The terms contained under this agreement are final and not subject to any objection, appeal, review, or reversal by the parties.

“The FIRS shall not investigate, audit or seek to enforce the disputed assessments against MCN, MAH for the period 1st April, 2010 to 31st March, 2023 in respect of the said tax liabilities covered under this Settlement Agreement.

“This agreement supersedes in its entirety any previous agreements or understandings between the parties relating to the matters dealt with herein.

“This Settlement Agreement shall be filed in court as the mutually agreed terms of settlement of the entire tax disputes between the parties.

“The parties have agreed to comply with and not to challenge the terms herein in any form or take any steps inconsistent with this terms of settlement.

“That the Parties have agreed that this terms of settlement as set out herein is final and binding and shall be made consent judgement of the Honourable Court.”

The annexure also indicated that the “terms of settlement shall not be cited as precedent in future by the parties herein or any third party in any Tribunal or Court upon which parties shall rely on nor shall it be used as a basis to seek or justify similar terms in any subsequent proceedings other than in relation to this settlement agreement. This terms shall not be offered, used or admitted into evidence in any subsequent proceedings other than in relation to this settlement agreement.”

READ THE DETAILED TERMS BELOW: 

IN THE FEDERAL HIGH COURT OF NIGERIA

IN THE LAGOS JUDICIAL DIVISION

HOLDEN AT LAGOS

                                                                    APPEAL NO: FHC/L/13A/2021

                                                                     SUIT NO: FHC/L/11A/2021

                                                                     APPEAL NO: FHC/L/14A/2021

                                                                     APPEAL NO: HC/L/16A/2021

BETWEEN

I. MULTICHOICE NIGERIA LIMITED         APPELLANTS/RESPONDENTS

2. MULTICHOICEAFRICA HOLDINGS BV.

               AND

FEDERAL INLAND REVENUE SERVICE          RESPONDENT/APPELLANT

TERMS OF SETTLEMENT

A.  BACKGROUND:

By a Notice of Assessment dated April 7, 2021, FIRS, on a Best of Judgment basis assessed Multichoice Nigeria Limited (MCN) to a total N1,822,923,909,317 (One Trillion, Eight Hundred and Twenty-two Billion, Nine Hundred and Twenty-three Million, Nine Hundred and Nine Thousand, Three Hundred and Seventeen Naira) (BOJ Assessment) as total taxes due for the 2011 to the 2020 years of assessments (the Period). The BOJ Assessment for the Period is broken down as follows:

1.1 N693,420,019,696 (Six Hundred and Ninety-three Billion, Four Hundred and Twenty Million, Nineteen Thousand, Six Hundred and Ninety-six Naira only) as Companies Income Tax (CIT) for the Period.

1.2 N188,061,605,535 (One Hundred and Eighty-eight Billion, Sixty-one Million, Six Hundred and Five Thousand, Five Hundred and Thirty-five Nairaonly) as Withholding Tax (WHT) for the Period.

1.3 N941,442,284,085 (Nine Hundred and Forty-one Billion, Four Hundred and Forty-two Million, Two Hundred and Eighty-four Thousand, Eighty-five Naira only) as Value Added Tax (VAT) for the Period.

2.Relatedly and by a Notice of Assessment dated June 15, 2021, FIRS, also on a Best of Judgment basis assessed MultiChoice Africa Holdings Ltd (MAH) to a total USD$342,531,206(Three Hundred and Forty-two, Five Hundred and Thirty-one, Two Hundred and Six United States' Dollars) (MAH BOJ Assessment) as total VAT due for the 2011 to the 2020 years of assessments (the MAH Period).

3. By several communications inclusive of FIRS' letter dated June 15, 2021, FIRS stated that it resorted to the BOJ Assessment and MAH BOJ Assessment (both to be referred to as the BOJ Assessments) on the basis that MCN and MAH did not cooperate with FIRS in FIRS' bid to audit and forensically examine MCN’s and MAH’s financial, accounting, and operational records for the Period and the MAH Period. MCN and MAH separately and jointly denied these allegations.

B.THE DISPUTE:

4. By a Notice of Appeal dated July 19, 2021, MCN instituted Tax Appeal No. TAT/LZ/CIT/062/2021 (TAT Appeal) against the BOJ Assessment at the Tax Appeal Tribunal Lagos Zone (TAT). Relatedly, MAH, by a Notice of Appeal dated August 13,2021, also instituted Tax Appeal No. TAT/LZ/VAT/064/2021 (MAH TAT Appeal) against the MAH BOJ Assessment at the TAT.

5. On August 24, 2021, when TAT Appeal came up at the TAT for the first time, FIRS orally applied that MCN must make security deposit in accordance with Paragraph 15(7) of the 5th Schedule to the Federal Inland Revenue Service (Establishment) Act 2007 (FIRS Act) before the TAT Appeal can be heard. Following MCN’s opposition, the TAT directed MCN to make a security deposit. MCN complied by making a Security Deposit of N2.7billion to the FIRS and on October 20, 2021, the TAT ruled that the MCN’s Security Deposit was in compliance with its Order and that the TAT Appeal could proceed to hearing.

6. On September 24, 2021, when the MAH TAT Appeal came up at the TAT for the first time, MAH notified the TAT of its payment of N2billion as Security Deposit to FIRS for the MAH TAT Appeal, in the manner of the TAT Appeal. FIRS rejected this overture and orally notified the TAT of the provisions of Order Ill Rule 6(a) and (b) of the Tax Appeal Tribunal (Procedure) Rules 2021 (2021 TAT Rules) on the requirement for MAH to deposit 50% of the BOJ Assessment and sought for the enforcement of the 2021 TAT Rules. On October 22, 2021, the TAT struck out the MAH TAT Appeal for non- compliance with the 2021 TAT Rules.

7. Aggrieved by the TAT’s decision of August 24, 2021, MCN by a Notice of Appeal dated September 21, 2021, appealed to this Honourable Court in this Appeal No. FHC/L/13A/2021.

8. Also aggrieved by the TAT’s earlier decision of October 20, 2021, FIRS, by a Notice of Appeal dated October 25, 2021, appealed to this Honourable Court in Appeal No. FHC/L/14A/2021.

9. MAH aggrieved by the TAT’s decision of October 22,2021, striking out the MAH TAT Appeal for non-compliance with the 2021 TAT Rules, appealed to this Honourable Court by a Notice of Appeal filed on 2nd November 2021 in Appeal No. FHC/L/16A/2021.

10. Earlier, the MCN had in Suit No. FHC/L/11A/2021: MultiChoice Nigeria Ltd v FIRS, sought before this Court, among others, a declaration that the provisions of Order III Rule6 of the Tax Appeal Tribunal Rules 2021 was unconstitutional and a breach of MCN’s right to fair hearing.

C. THE HONOURABLE COURT’S DIRECTION + SETTLEMENT MOVES:

11. On March 31, 2022, this Honourable Court, at the instance of the parties to this Suit, ordered MCN, FIRS and MAH (hereinafter, the Parties) to, in addition to this Suit, explore the settlement of their disputes in ail Suits Nos. FHC/L/11A/2021; FHC/L/14A/2021 and FHC/L/16A/2021 (altogether, the Related Suits).

12. The Parties have since been having reconciliatory meetings and FIRS has been able to satisfactorily conduct its audits of MCN’s and MAH’s financial, accounting, and operational records for the Period and the MAH Period.

13. Further to paragraph 11 above, MCN and MAH have, in addition to the N4.7billion Security Deposit MCN deposited in paragraphs 5 and 6 above, deposited with FIRS an additional N25.3billion, giving rise to a total N30billion; a sum which the Parties and MAH agree is a deposit on account jointly deposited by MCN and MAH with FIRS.

D. TERMS OF SETTLEMENT:

14. Having finally reached a settlement of their disputes, the Parties hereby agree that the Consent Judgement of this Honourable Court in this Suit and in the Related Suits shall be as follows:

14.1 FIRS hereby withdraws the BOJ Assessment Notices dated April 7, 2021, and June

         15, 2021, against MCN and MAH, respectively; and shall in its place issue a new

         Assessment Notice on or before January 1, 2024.

14.2 The new assessment notice shall be in the sum of N35,400,000,000.00 (Thirty-five billion, four hundred million Naira) covering the period of April 1, 2010, to March 31, 2023.

14.3 Deriving from paragraph 12 above and the total N30billion already deposited with FIRS by MCN and MAH, only a total sum of N5,400,000,000 (Five Billion and Four Hundred Million Naira) is hereby now payable by MCN and MAH to FIRS; and which sum shall become payable in 6 (six) equal monthly instalments commencing from January 2024 and ending in June 2024 (the Period), which sums shall be paid on or before the last day of each month for the Period.

14.4 The Parties Agree that this Terms of Settlement is neither an admission of guilt nor a concession by the Parties that their respective claims are not well founded.

15. In the event that MCN and MAH fail to pay the agreed sum as stated in the agreed time frame, MCN and MAH shall be considered to be in default of their payment obligations, and FIRS shall provide a written Notice of Default. MCN and MAH shall therefore have an opportunity to cure such default within twenty-one (21) days from the date of receipt of the Notice of Default.

16. In the event of failure by the MCN and MAH to pay the agreed sum within the time frame, FIRS shall revert to Court or take other enforcement actions against MCN and MAH to recover the original tax liabilities with the interest and penalties.

17. Parties having reached a resolution as outlined in paragraph 14 above, have also entered and duly executed the Settlement Agreement dated December 21, 2023.The parties have agreed that the terms of the said agreement are hereby incorporated and adopted as part of this Terms of Settlement. The Settlement Agreement dated December 21, 2023, is herein annexed to this Terms of Settlement as Annexure 1.

18. The parties have consented that the foregoing shall be the Judgment of this Honourable Court in this Suit and the Related Suits.

DATED this …. Day of January 2024.

MULTICHOICE NIGERIA LIMITED (MCN) AND MULTICHOICE AFRICA HOLDING BV (MAH) Counsel:

Name: AJAH JOSEPH OKORIE

Designation: SENIOR ASSOCIATE, AO2LAW

Signature

Date: 12 – 01 – 2024

MULTICHOICE NIGERIA LIMITED (MCN) Counsel for Suit No: FHC/L/CS/11A/2021

Name: Toyin Pinheiro SAN

Designation:

Signature

Date: 12-1-2024

FEDERAL INLAND REVENUE SERVICE (FIRS)Counsel:

Name: HENRY O. UKAEJIOFOR FCIArb

Designation: COUNSEL

Signature:

Date: 15th January, 2024

ANNEXTURE

SETTLEMENT AGREEMENT

Between

FEDERAL INLAND REVENUE SERVICE

(FIRS)

MULTICHOICE NIGERIA LIMITED

(“MCN”)

and

MULTICHOICE AFRICA HOLDINGS BV

(“MAH”)

This terms of settlement is made this 21st day of December 2023

Between

THE FEDERAL INLAND REVENUE SERVICE a Government Agency established by law and charged with the responsibility of assessing, collecting and accounting to the Government for Federal taxes, with its registered address at No. 15 Sokode Crescent, Wuse Zone 5, Abuja (hereinafter referred to as FIRS) which expression shall, where the context so admits include its agent, successors in tiles, authorized representatives and assigns) of the one part; and

MULTICHOICE NIGERIA LIMITED (registration number 234847), a company duly registered in accordance with the laws of the Federal Republic of Nigeria and having its registered address at Plot 1381, Tiamiyu Savage Street, Victoria-Island, Lagos; (hereinafter referred to as MCN) which expression shall, where the context so admits include its agent, successors in titles, authorized representatives and assigns) of the other part; and

MULTICHOICE AFRICA HOLDINGS B.V. (registration number: 34272166) a company duly incorporated within the laws of the Kingdom of the Netherlands and having its registered address at Taurus Avenue 105,2132 LS, Hoofddorp, Netherlands; (hereinafter referred to as MAH”) which expression shall, where the context so admits include its agent, successors in titles, authorized representatives and assigns) of the other part.

WHEREAS:

i. The FIRS by its letter dated 07 April 2021 issued a Notice of Assessment/Demand Notice to MCN for a cumulative tax (CIT, VAT and WHT) liability of N1,822,923,909,317.00 (One Trillion, Eight Hundred and Twenty-Two Billion, Nine Hundred and Twenty-Three Million, Nine Hundred and Nine Thousand, Three Hundred and Seventeen Naira) covering the 10 years' financial period 2011 to 2020 (the Disputed Assessment 1).

ii. MCN objected to the Disputed Assessment vide its letter dated 28 April 2021 (MCNs Letter of Objection).

iii. Dissatisfied with MCNs Letter of Objection, the FIRS commenced enforcement actions against MCN.

iv. MCN filed an Appeal at the Tax Appeal Tribunal dated 27 July.2021 seeking several reliefs and a determination of the tax dispute between the FIRS and MCN.

V. The FIRS by its letter dated 15 June 2021 issued a Notice of Assessment/Demand Notice to MAH for a tax (VAT) liability of USD$342,531,286 (Three Hundred and Forty-Two Million, Five Hundred and Thirty-One Thousand, Two Hundred and Eighty- Six United States Dollars) including interest and penalty (Disputed MAH Assessment).

vi. MAH objected to the Disputed MAH Assessment issued to it by the FIRS vide its letter dated 6 July 2021.

vii. MAH filed an Appeal at the Tax Appeal Tribunal dated 16 August 2021 seeking several reliefs and a determination of the disputed tax between the FIRS and MAH.

viii. MCN and MAH had objected to the FIRS assessments and filed their respective appeals at the Tax Appeals Tribunal; MCN and MAH without prejudice and upon the request of FIRS transferred N30Billion (Thirty Billion Naira) on account to the FIRS.

ix. The MCN and MAH appeals are still pending before the TAT as well as the appeals filed by the FIRS, MCN and MAH respectively before the Federal High Court, Ikoyi, Lagos covering the tax disputes between the parties.

X. The parties are desirous of an amicable resolution of all the existing tax disputes between the parties including the matters pending before the Tax Appeal Tribunal and The Federal High Court respectively.

xi. Parties held meetings and discussions and finally resolved that MCN and MAH shall pay the sum of N35,400,000,000.00(Thirty-Five Billion, Four Hundred Million Naira) as the full and final settlement of its tax liability for the year 1st April, 2010 to 31st March, 2023.

1. THE PARTIES HEREBY AGREE AS FOLLOWS:

1.1 The MCN and MAH shall pay the sum of N35,400,000,000.00 (Thirty-Five Billion, Four Hundred Million Naira) being the full and final payment in settlement of their tax liabilities for the period 1st April, 2010 to 31stMarch, 2023.

1.2 FIRS shall discharge MCN of the liability under the disputed tax assessment of N1,822,923,909,317.00(One Trillion, Eight Hundred and Twenty-Two Billion, Nine Hundred and Twenty-Three Million, Nine Hundred and Nine Thousand, Three Hundred and Seventeen Naira

1.3 FIRS shall discharge MAH of the liability under the disputed tax assessment of USD$342,531,286 (Three Hundred and Forty-Two Million, Five Hundred and Thirty-One Thousand, Two Hundred and Eighty-six United States Dollars).

1.4 Upon receipt of a new assessment from the FIRS being N35,400,000,000.00 (Thirty five billion, four hundred million Naira), MCN and MAH shall pay to the FIRS this sum of N5,400,000,000.00 (Five billion, four hundred million Naira), which will be in addition to the N30,000,000,000.00 (Thirty Billion) previously paid by the MCN and MAH amounting to a total sum of N35,400,000,000.00 (Thirty five billion, four hundred million Naira) as full and final settlement of all liabilities for the said period.

1.5 The additional liability of N5,400,000,000.00 (Five Billion, Four Hundred Million Naira) shall become payable from January 2024 in 6 monthly installments.

1.6 The FIRS shall raise a new assessment covering both the MACN and MAH to reflect the amount of N35,400,000,000.00 (Thirty-Five, Billion, Four Hundred Million Naira) as full, final and conclusive settlement between the parties in respect of taxes disputed in relation to the period 1st April 2010 to 31st March, 2023.

1.7 The terms contained under this agreement are final and not subject to any objection, appeal, review, or reversal by the parties.

1.8 The FIRS shall not investigate, audit or seek to enforce the disputed assessments against MCN, MAH for the period 1st April, 2010 to 31st March, 2023 in respect of the said tax liabilities covered under this Settlement Agreement.

1.9 This agreement supersedes in its entirety any previous agreements or understandings

       between the parties relating to the matters dealt with herein.

1.10 This Settlement Agreement shall be filed in court as the mutually agreed terms of settlement of the entire tax disputes between the parties.

1.11 The parties have agreed to comply with and not to challenge the terms herein in any form or take any steps inconsistent with this terms of settlement.

1.12 That the Parties have agreed that this terms of settlement as set out herein is final and binding and shall be made consent judgement of the Honourable Court.

1.13 These terms of settlement shall not be cited as precedent in future by the parties herein or any third party in any Tribunal or Court upon which parties shall rely on nor shall it be used as a basis to seek or justify similar terms in any subsequent proceedings other than in relation to this settlement agreement. This terms shall not be offered, used or admitted into evidence in any subsequent proceedings other than in relation to this settlement agreement.

1.14 This term of settlement is neither an admission of liability nor a concession by the Parties that its claims are not well founded.

2. CONFIDENTIALITY

Each of the parties shall at all times keep confidential and shall not, without the prior written consent of the other party, disclose or divulge to any third party any information relating to the business or affairs of the other party, the contents of this agreement or any agreement entered into pursuant to this agreement except as may be required to comply with any applicable law, governmental or regulatory authority, rule, regulation or order or to enforce any of the terms of this agreement.

3. GOVERNING LAW

This Agreement shall be interpreted, construed and enforced in accordance with the applicable laws of the Federal Republic of Nigeria.

4. DEFAULT PAYMENT

4.1. In the event that MCN and MAH fails to pay the agreed sum as stated above within the agreed time frame, the MCN and MAH shall be in default of the payment obligations, and the FIRS shall provide a written Notice of default. The MCN and MAH shall therefore have an opportunity to cure such default within twenty-one (21) calendar days from the date of receipt of the notice of default.

4.2. In the event of failure by the MCN and MAH to pay the agreed sum within the time frame, the FIRS shall revert back to Court or take other enforcement actions against MCN and MAH to recover the original tax liabilities together with the interest and penalties.

In witness whereof Parties have executed this terms of settlement on the date first above written.

EXECUTIVECHAIRMAN, FIRS 

———————————–

In the presence of:

SECRETARY TO THE BOARD

Name: Nneka lfekwuna

Signature

MULTICHOICE NIGERIA LIMITED

—————————————

In the presence of:

Name: Lionel Brits

Designation: Finance Director

Signature:

MULTICHOICE AFRICA HOLDINGS BV

—————————

In the presence of:

Name: Retief Tromp

Designation: Chief Financial Officer

Signature:

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