FIRS opposes tax relief for companies developing Umusadege oil field

Babatunde Fowler Executive Chairman Federal Inland Revenue Service

The Federal Inland Revenue Service (FIRS) has opposed the request by two oil companies Suntrust Oil and Midwestern Oil and Gas to be granted a 5 year tax relief.

What led to the court case ?

The FIRS and the NIPC had written to the two companies informing them of the reduction of the tax holiday from 5 years to 3 years. Both companies subsequently took the agencies to court.

Midwestern Oil & Gas Company Limited was incorporated in 1999 and commenced operations in 2001. The Company is owned by a group of Nigerian Investors and Delta State Government. In 2003, the Company was awarded 70% interest in Umusadege Field located in OML 56 which is situated at the northern area of Delta State, Nigeria. Midwestern is the operator of the field while SunTrust Oil Company Ltd its JV Partner holds 30% interest which is jointly held by Mart Umusadege Resources Nigeria Ltd.

SunTrust Oil is an Exploration and Production Company with its field operations in Delta State and its Headquarters in Lagos, Nigeria. SunTrust Oil alongside its partners are currently producing an average of 25,000bpd from its Umusadege field in Delta State.

The FIRS started as part of a colonial tax organisation under the name Inland Revenue Department of Anglophone West Africa. The department’s scope of administration covered Nigeria, Ghana, Sierra Leone and the Gambia. In 1943, the Nigerian Inland Revenue Department was carved out of the Inland Revenue Department of Anglophone West Africa and established as an autonomous body under the supervision of the Commissioner of Income Tax.

The NIPC was established by the NIPC Act of 1995, and commenced operations in 1997. The agency’s broad functions include the promotion of Nigeria as an investment destination, The NIPC also grants pioneer status to industries. Pioneer status means for a certain period, those industries are exempted from paying taxes.