The Single Contract Basis of International Corporate Taxation: A Review of Saipem v Firs

Nigeria's principal corporate tax legislation, the Companies Income Tax Act 1961, stipulates as a basis for the taxation of a nonresident company deriving income in Nigeria, what it terms a “single contract.” This, according to the statute, entails a contract that embodies the activities of surveys, deliveries, installations or construction (common features of what is in common parlance termed a “turnkey project”). A major challenge with the application of the provision lies in the comprehension of the pivotal term, “single contract.” A diversity of views on the import of the term paints a telling picture of ambiguity and underlies the complication of its applicability. A recent decision of the Nigerian Court of Appeal provided some much-needed judicial perspective on the point. The Court in the said case advanced a line of reasoning which almost certainly guarantees tax liability in Nigeria for a nonresident company participating in a Nigerian turnkey project regardless, it seems, of how the relevant contract is structured or performed – an apparent leaning towards an anti-avoidance objective of statutory interpretation. This paper, in search of clarity, examines the decision of the Court in Saipem Contracting Nig. Ltd & 2 Ors. v Federal Inland Revenue Service & 2 Ors in view of the language of the Act, case law and other perspectives both at home and abroad.