March 27, 2018
Companies engaged in petroleum operations are required to pay petroleum profits tax and submit certain returns as stipulated in the relevant sections of the Petroleum Profits Tax (PPT) Act or “the Act”. Similarly, there are certain provisions in the Companies Income Tax Act (CITA) requiring all companies operating in Nigeria to submit tax returns in line with the CITA. This article evaluates the requirements for exploration and production (E&P) companies during pre-production phase as stipulated in the PPT Act vis-à-vis the requirements in CITA for every company to submit tax returns.
The PPT Act is the legal basis for the imposition of tax on the income of companies engaged in petroleum operations. The PPT Act requires companies engaged in petroleum operations to file tax returns on the basis of their accounting period.
Section 8 of the PPT Act provides that:
There shall be levied upon the profit of each accounting period of any company engaged in petroleum operations during that period, a tax to be charged, assessed and payable in accordance with the provisions of this Act. (Emphasis mine)
Interestingly, Section 2 of the PPT Act defines accounting period as:
With respect to tax filing for companies engaged in petroleum operations, Section 30 (2) of the PPT Act provides for companies engaged in petroleum operations to submit tax returns within five months after the end of an accounting period.