Petroleum Industry Act, 2021 PDF

A 292 2021 No. 6 Petroleum Industry Act, 2021 (5) Where there is no fiscal oil price established for a crude oil stream, the Commission shall establish fiscal oil price for such stream and every fiscal oil price per barrel established shall bear a fair and reasonable relationship— (a) to the esta...

A 292 2021 No. 6 Petroleum Industry Act, 2021 (5) Where there is no fiscal oil price established for a crude oil stream, the Commission shall establish fiscal oil price for such stream and every fiscal oil price per barrel established shall bear a fair and reasonable relationship— (a) to the established fiscal oil price of Nigerian crude oil streams of comparable quality and specific gravity ; or (b) where there are no such Nigerian crude oil streams of comparable quality and specific gravity it shall bear a fair and reasonable relationship to the official selling prices at main international trading centers for crude oil of comparable quality and gravity, due regard being had in either case to freight differentials and other relevant factors. (6) Where any crude oil, which in relation to a particular company is its chargeable oil, is exported from Nigeria by another company, that crude oil shall for the purpose of this section be deemed to be exported from Nigeria by that particular company. PART IV—ASCERTAINMENT OF CHARGEABLE PROFITS AND CONSOLIDATION FOR TAX PURPOSES Artificial transactions. 269.—(1) Where the Service is of the opinion that any disposition is not given effect to or that any transaction which reduces or would reduce the amount of any tax payable is artificial or fictitious, the Service may disregard any such disposition or direct that such adjustments shall be made with respect to the companies’ liability to tax as the Service considers appropriate to counteract the reduction of liability to tax effected or reduction which would otherwise be effected, by the transaction and the companies concerned shall be assessed accordingly. (2) In subsection (1), the expression “disposition” includes any trust, grant, covenant, agreement or arrangement. (3) For the purpose of this section, the following transactions shall be deemed to be artificial or fictitious, namely, transactions between persons one of whom has control over the other or between persons both of whom are controlled by some other person which, in the opinion of the Service, were not made on terms which might be expected to have been made by independent persons engaged in the same or similar activities dealing with one another at arm’s length. (4) A company in respect of which any direction is made under this section, shall have a right of appeal in like manner as though for the purpose of Part III of this Chapter such direction was an assessment. (5) Subject to this Act, the provisions of the Income Tax (Transfer Pricing) Regulations 2018 shall apply. Petroleum Industry Act, 2021 2021 No. 6 A 293 270. Where a company has not yet commenced the production and sale or disposal of chargeable oil, all costs incurred wholly, reasonably, exclusively and necessarily for the purpose of coming into upstream petroleum operations, subject to sections 263 and 264 of this Act, shall upon commencement of production and sale or disposal of chargeable oil be deemed to have incurred a qualifying pre-production capital expenditure which shall be amortised in line with paragraphs 5 and 17 of the Fifth Schedule to this Act. Preproduction cost. 271.—(1) Without prejudice to section 275 of this Act, where a trade or business of upstream petroleum operations carried on in Nigeria by a company is sold or transferred to another company for the purposes of better organisation of that trade or business or the transfer of its management and any asset employed in that trade or business is sold or transferred, then, if the Service is satisfied that one of those companies has control over the other or that both companies are controlled by some other person or are members of a recognised group of companies and have been so for a consecutive period of at least three years prior to the date of reorganisation, the provisions set out in subsection (2) shall have effect. Trade or business sold or transferred. Fifth Schedule. (2) Where subsection (1) applies, the Service may in its discretion if, on or before the date on which the trade or business is so sold or transferred, the first sale of or bulk disposal of chargeable oil by or on behalf of the company selling or transferring the trade or business has occurred, but the first sale of or bulk disposal of chargeable oil by or behalf of the company acquiring that trade or business has not occurred, direct that— (a) the first accounting period of the company acquiring that trade or business shall commence on the date on which the sale or transfer of the trade or business takes place and end on 31st December of that same year, and the definition of accounting period in section 318 of this Act shall be construed accordingly ; (b) for the purpose of the Fifth Schedule to this Act, the asset sold or transferred to the company acquiring that trade or business by the company selling or transferring the trade or business shall be deemed to have been sold for an amount equal to the residue of the qualifying expenditure on the asset on the day following the day on which the sale or transfer occurred ; and (c) the company acquiring the asset so sold or transferred shall be deemed to have received all allowances given to the company selling or transferring the trade or business in respect of the asset under the Fifth Schedule to this Act and any allowances deemed to have been received by that company under the provisions of the Fifth Schedule, provided that the Service in its discretion may— Fifth Schedule. Fifth Schedule. A 294 2021 No. 6 Petroleum Industry Act, 2021 (i) require the company selling or transferring the trade or business or the company acquiring that trade or business, to guarantee or give security to the satisfaction of the Service for payment in full of tax due or to become due from the company selling or transferring the trade or business, and (ii) impose such conditions as it deems fit on either of the companies or on both of them. (3) In the event of failure by the company or companies selling to fulfil the guarantee or conditions, the Service may revoke the direction and may make the additional assessments or repayment of tax as may be necessary to give effect to the revocation. (4) Where the acquiring company makes a subsequent disposal of the assets thereby acquired within the succeeding three years after the date of acquisition, any concession enjoyed under this subsection shall be rescinded and the company shall be treated as if it did not qualify for the concession as at the date of the initial reorganisation. (5) Where a trade or business of petroleum operations carried on in Nigeria by a company incorporated under any law in force in Nigeria is sold or transferred to another company and any asset employed in that trade or business is so sold or transferred, and the Service is satisfied that the companies are not connected and that none has control over the other or both are not controlled by another company, the— (a) transaction shall be dealt with under section 266 (1) (c) ; and (b) accounting period of the new trade or business shall be as provided for in subsection (2). (6) For the purpose of subsection (2) (a), the accounting period of the company acquiring that trade or business shall commence on the date on which the sale or transfer of the trade or business to the company takes place or on such date within the calendar month in which the sale or transfer takes place as may be elected by the company with the approval of the Service and end on 31st December of that same year and the definition of “Accounting Period” under this Act shall be construed accordingly. (7) A merger, take-over, transfer or restructuring of the trade or business carried on by a company shall not take place without the approval and having obtained direction of the Service on any tax that may be due and payable. (8) Reference to a ‘trade or business’ in this section shall include references to any part of the trade or business. Petroleum Industry Act, 2021 2021 No. 6 A 295 272.—(1) A company engaged in upstream petroleum operations across terrains shall be allowed to consolidate costs for the purpose of companies income tax. Consolidation of costs and taxes. (2) A company engaged in upstream petroleum operations related to crude oil across terrains shall be allowed to consolidate costs and taxes for the purposes of hydrocarbon tax only across assets in which it holds licences and leases in accordance with the two categories of chargeable tax stipulated in section 267 of this Act. (3) In respect of a company in existence prior to the commencement of this Act, the amount of any loss incurred during any accounting period by a company selling or transferring its trade or business whether to a connected or unrelated party, being a loss which has not been allowed against any assessable profit of any accounting period of that company shall not be allowed against any assessable profit of the company acquiring that trade or business. (4) A company that is a contractor in a contract under section 85 of this Act shall be allowed to consolidate its losses and revenues across petroleum prospecting licences and petroleum mining leases granted after the commencement of this Act, for the purposes of subsections (1) and (2) with respect to the two tax classes under section 267 of this Act. PART V—PERSONS CHARGEABLE 273.—(1) Any person, other than a company, who engages in upstream Partnerships. petroleum operations either on his own account or jointly with any other person or in partnership with any other person with a view to sharing the profits arising from the operations, commits an offence. (2) Where the person referred to in subsections (1) has benefitted from any profits on upstream petroleum operations, the person shall be subject to hydrocarbon tax and companies income tax under this Act on the profits and shall pay a penalty provided under section 297 of this Act. (3) Where two or more companies are engaged in upstream petroleum operations either in partnership, in a joint venture or in concert under any scheme or arrangement, tax shall be charged and assessed on them in accordance with subsection (4). (4) The apportionment of any profits, outgoings, expenses, liabilities, deductions, qualifying expenditure and the tax chargeable upon each company shall be in line with the equity interest of the parties under a jointly executed agreement that will be made available to the Service and where no jointly executed agreement is made available, the Commission shall advise the Service the approved equity interest of the parties and it shall be binding on the parties.