The Federal Inland Revenue Service, FIRS, has agreed to receive from CMA CGM SA, a French shipping company operating in Nigeria, N5 billion only out of its N8.4 billion tax liability for ten years – 2014 to 2023.
FIRS opted for an out of court settlement with the French company over its N8.4 billion tax liability “in order to avoid delays, uncertainty, inconvenience and the expense of protracted litigation of the claims.”
The outstanding tax liability of the company assessed by the FIRS for the 10 years was N8,400,000,000.00 (Eight Billion, Four Hundred Million Naira only) without interest and penalties for the period under settlement.
The parties held several meetings to negotiate a settlement and finally have mutually resolved that the Company shall pay N5,000,000.00 (Five Billion Naira) and legal costs incurred by FIRS as the full and final settlement of its tax liabilities for the 2014 to 2023 years of assessment.
FIRS had audited the Company for 2019 and 2020 years of assessment and issued notices of assessment for additional Companies In Tax, CIT, of N1,028,482,368.40 (One Billion, Twenty-Eight Million, Four Hundred and Eighty-Two Thousand, Three Hundred and Sixty -Eight Naira, Forty Kobo) for 2019 and N965,645,697.83 (Nine Hundred and Sixty-Five Million, Six Hundred and Forty-Five Thousand, Six Hundred and Ninety-Seven Naira, Eighty-Three Kobo) as CIT for 2020 in respect of demurrage/detention, cleaning fees, Shipping Line Agency Commission, NIMASA Environmental Levy and bonded terminal commission which the company considered non-freight income earned from Nigeria.
The company objected to the additional assessment on the grounds that the income be exempted from CIT based on the Nigeria-France Double Taxation Agreement.
Following a Notice of Refusal to Amend issued by FIRS to the company, CMA CGM SA instituted an appeal suit at the Tax Appeal Tribunal Lagos, TAT, to dispute the additional assessment served on it by FIRS on 15 September, 2023. TAT ruled in favour of FIRS
The company subsequently filed an appeal at the Federal High Court, Lagos with Suit No.: FHC/L/16A/23. It is pending before the Court.
The company has, however, opted for an out of Court settlement. The company has proposed and the FIRS has agreed to an amicable settlement of not just the disputed amount before the Court but a holistic settlement of the company’s outstanding CIT liabilities for the period of 2014 to 2023 years of assessment which includes the appeal at the Court of Appeal in Appeal No. CA/LAG/CV/939/2023 between CMA CGM SA and Federal Inland Revenue Service in respect of 2014 to 2015 years of assessment.
In a term of settlement jointly filed before the court, it was stated that:
- The company shall pay the sum of N5,000,000,000 (Five Billion Naira only) as the full and final settlement of its tax liability for the 2014 to 2023 years of assessment on or before 31 December 2023; in accordance with written instructions to be provided by the FIRS immediately upon the execution of this agreement.
- The FIRS has a claim for reasonable expenses necessarily incurred and reasonable attorney’s fees and costs. The FIRS’s claim for reasonable attorney fees is not released herein but the company agrees to pay reasonable attorney’s fees and costs in connection with this settlement. The attorney’s cost and fee shall not exceed 10% of the settlement sum.
- The Parties mutually agree that upon the execution of this agreement, none of them shall initiate or participate in any legal or administrative proceedings to challenge or contest the legality, enforceability, or terms of this agreement, including but not limited to, grounds of procedural irregularities, fraud, mistake or any other legal or equitable theory.
- The Parties agree that these terms of settlement as set out herein are final and binding and shall be made the consent judgement of this Honourable Court.
- Pursuant to these terms of settlement, the company shall withdraw its appeal at the Court of Appeal with Appeal No. CA/LAG/CV/939/2023 as soon as possible following the execution of the agreement.
- These terms of settlement shall not be cited as precedent in future by either party herein or in any Tribunal or Court upon which Parties may rely 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. These terms shall not be offered, used, or admitted into evidence in any subsequent proceedings other than in relation to this settlement agreement.
- These terms of settlement contain the entire understanding and agreement between understandings, and agreements with respect to the matters covered herein.
- There are no restrictions, agreements, promises, warranties, covenants, or undertakings with respect to the matters covered by these terms of settlement other than those expressly set forth herein.
- Parties expressly represent and warrant that the execution and performance of, or compliance with their respective obligations under these terms of settlement is duly authorized by each of them and that the persons signing same have the necessary and appropriate authority to do so.
- These terms of settlement are neither an admission of liability by the company nor a concession by the FRIS that its claims are not well founded.
- Default payment:
- In the event that the company fails to pay the agreed sum as stated above within the agreed time frame, the company shall be in default of the Respondent’s payment obligations, and the Respondent shall provide a written notice of default. The Company 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.
- b) In the event of failure by the company to pay the agreed sum, the FIRS shall revert to the Court to recover the original tax liability together with the interest and penalties.
- These terms of settlement shall be filed before the Honourable Court and adopted as judgment of the Court.1q
Justice Lewis Allagoa, after hearing the submission of I.O. Reji, counsel for CMA CGM SA, and Eze Okam, counsel for FIRS, adopted the terms of settlement, ordered as follows:
- That the TERMS OF SETTLEMENT executed by parties and their respective counsel, now adopted in court by counsel for both parties; THE TERMS OF SETTLEMENT is hereby made the Judgement of the court between parties.