Nigeria: Petroleum investment allowance, disposal of assets used for petroleum operations

Nigeria: Petroleum investment allowance

The Federal High Court (Lagos) in reversing a portion of a decision of the Tax Appeal Tribunal, held that the petroleum investment allowance is to be included in the computation of the balancing charge regarding the disposal of assets used for petroleum operations.


The case is: Federal Inland Revenue Service v. Total E&P Nigeria Ltd (28 September 2020)

The Federal High Court specifically held that the petroleum investment allowance is to be added to annual allowance claimed on the assets for the purpose of computing the balancing charge for disposed assets.

The Federal High Court, however, agreed with the findings of the tribunal that:

  • The tertiary education tax is not chargeable on the balancing charge.
  • Interest paid on intercompany loan qualifies as a tax-deductible expense for petroleum profit tax purposes, provided that the interest rate is at arm’s length under terms prevailing in the open market.

Read a January 2021 report prepared by the KPMG member firm in Nigeria

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