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NIGERIA LIQUEFIED NATURAL GAS, LNG (FISCAL INCENTIVES, GUARANTEES AND ASSURANCES) ACT
ARRANGEMENT OF SECTIONS
Early termination of tax relief period
Guarantees and assurances to Nigeria LNG limited and its shareholders
NIGERIA LIQUEFIED NATURAL GAS (FISCAL INCENTIVES, GUARANTEES AND ASSURANCES) ACT
An Act to confer pioneer status on the Nigeria LNG Limited and to exempt the company from certain taxes, customs duties, other levies and the provisions of the Pre-Shipment Inspection of Imports Act and to provide for the guarantees and assurances by the Federal Government to the company and its shareholders.
[24th April, 1989] [Commencement.]
(1) The registered company known as the Nigeria LNG Limited (hereafter in this Act referred to as “the Company”) shall be regarded as a pioneer company within the provisions of the Industrial Development (Income Tax Relief) Act.
(2) The provisions of the Industrial Development (Income Tax Relief) Act, other than sections 2, 3 and 7 thereof and as otherwise provided in this Act, shall apply to the Company.
(3) The business undertaken by the Company and its products are hereby declared as pioneer industry and pioneer products respectively.
(4) For the purposes of this Act, “production day” means the date of the first commercial delivery of liquefied natural gas produced by the Company to a purchaser of the liquefied natural gas, upon which date the trade or business of the Company shall be deemed to commence for the purposes of the Companies Income Tax Act.
Notwithstanding the provisions of section 10 of the Industrial Development (Income Tax Relief) Act, the tax relief period of the Company shall commence on the production day of the Company and shall continue for a period of ten years, so however that the tax relief period shall terminate at the first anniversary date after the first five years when the cumulative average sales price of liquefied natural gas reaches US 3 dollars/mmbtu as calculated in the First Schedule to this Act in accordance with which such calculation shall only be made annually at each anniversary date.
Except as otherwise provided under this Act, the Company shall be subject to tax under the provisions of the Companies Income Tax Act.
(1) The authorised and issued share capital of the Company shall, notwithstanding any provisions to the contrary in any other Act, be denominated in United States dollars and the books and records of the Company and the accounts shall also be drawn up in the same currency.
(2) Notwithstanding any provision to the contrary in the Companies Income Tax Act or any other Act, the Company shall compute its income, expenditure (both capital and revenue), profits, assessable profits, total profits and all other amounts required to be computed or calculated by the Companies Income Tax Act or any Act, in United States dollars, and in particular the reference in section 40 of the Companies Income Tax Act to the rate of tax shall for the Company be taken to be expressed in the same number of cents for each dollar as that section expresses the rate in kobo for each naira.
(1) Interest payable by the Company in any year, whether to third parties or to shareholders, associates or subsidiaries of shareholders, shall be deductible in full for tax purposes.
(2) All interests payable by the Company before the end of its tax relief period shall be deemed to have accrued for tax purposes on the day next following the end of the tax relief period.
(1) Interests or any other amounts payable or paid to any company other than a Nigerian company in respect of any loans or other financial arrangements made with the Company shall be exempt from taxation in Nigeria.
(2) Dividends paid out of the account kept by the Company for the purposes of section 17 (1) of the Industrial Development (Income Tax Relief) Act, whenever declared or paid, shall be deemed to be paid out of profits exempted from tax and the proviso to section 18 of the Companies Income Tax Act shall apply accordingly.
(3) In so far as any payments are made by the Company in respect of interest or other payments within subsection (1) of this section, dividends within subsection (2) of this section and payments within subsection (4) of this section, the provisions of section 78, 79, 80 and 81 of the Companies Income Tax Act, including any provisions made pursuant to those sections, shall not apply.
(4) Notwithstanding the provisions of subsection (2) of this section, dividends declared out of profit not credited to the special account under the provisions of section 17 of the Industrial Development (Income Tax Relief) Act, shall be subject to the normal rules on withholding tax.
(5) In respect of any work or services provided from outside Nigeria to the Company by any person other than a Nigerian company or citizen, that person shall be exempt from tax on income or profits arising from the provision of that work or those services.
(6) Any transfer of shares or any other interest in the Company or any company connected with the Company, shall be deemed, for the purposes of the Capital Gains Tax Act, to take place for such consideration as would leave the transfer with neither a gain nor a loss under section 12 of that Act, if the transferor and transferee are connected within the meaning of section 23 of the same Act.
(7) For the purpose of subsection (6) of this section, legal proof of the relationship between the transferor and any transferee shall be clearly established.
(8) Where any shipping company owned directly or indirectly by the Company or one or more of the shareholders of the Company carries on the business of transport by sea of liquefied natural gas produced by the Company, such shipping company shall be exempt from tax in Nigeria under section 14 of the Companies Income Tax Act, or any other law, on the profits derived from that business.
(9) In respect of any payment made by the Company to a shipping company within subsection (8) of this section for the shipment of liquefied natural gas, by way of hire, freight, demurrage or otherwise, the Company shall be exempt from the requirement to withhold tax or any other impost from the payment, under section 78 of the Companies Income Tax Act, or any other law.
(10) The provisions of the National Shipping Policy Act and the regulations made thereunder shall not be applicable to the Company, its contractors, sub-contractors, its customers or a shipping company referred to in subsection (8) of this section.
(1) The Company and its contractors and sub-contractors shall be exempt from the payment of import duties, taxes and all other duties, levies, charges and imports of a similar nature, in respect of all necessary imports of plant, machinery, goods and materials for use in the construction of, or incorporation in the plant, jetties, shipping, transmission facilities and ancillary works used in the Company’s business, and in respect of any major spare parts needed in the event of a plant failure and ordered within two years of commissioning that part of the plant for which the particular spare part is ordered, subject to subsection (2) of this section.
(2) The Company shall provide to the Comptroller-General of Customs a schedule of the categories of items within subsection (I) of this section to be imported, before the items are imported into Nigeria and if the Comptroller-General of Customs is not satisfied that it is necessary to import any item or items so notified, he shall give notice to the Company within fourteen days of receipt of the schedule or revisions thereto, and import duties or other tax levied by any other Act shall be payable by the Company in respect of that item or items.
(3) Where the Company disagrees with any notice issued by the Comptroller-General of Customs under subsection (2) of this section, it may, within thirty days of receipt of the notice, give written notice of its dissatisfaction to the Comptroller-General of Customs and to the Minister of Internal Affairs, who shall hear representations from both the Company and the Comptroller-General of Customs to determine whether exemption shall be granted; and the determination of the Minister of Internal Affairs on the matter shall be final and binding.
(4) Pending notification of the determination of the Minister, the importation of the items in dispute shall be allowed without any restriction or payment of duty.
(5) Such duty as may be payable under the determination of the Minister shall be paid upon importation of the item in dispute or within thirty days of the receipt of the Minister’s notification, whichever is the later.
(6) The provisions of the Pre-Shipment Inspection of Imports Act and the regulations made thereunder requiring pre-shipment inspection, the submission of reports in connection therewith under the Comprehensive Import Supervision Scheme and the “Form M” Procedures, the “Form C-3.1” Procedures or such other similar procedure of the Central Bank of Nigeria, shall not apply in relation to the importation of a plant, machinery, goods and materials for use in the construction of or incorporation of a plant, jetty, shipping, transmission facilities and ancillary works used in the Company’s business and in respect of any major spare parts needed in the event of a plant failure and ordered within two years of the commissioning of that plant for which the spare part is ordered.
(7) No export duties, taxes or other duties, levies, charges or impost of a similar nature shall be payable or imposed on the export of liquefied natural gas or other hydrocarbons produced by the Company.
Notwithstanding the provisions of sub-paragraph (7) of paragraph 24 of the Second Schedule to the Companies Income Tax Act, the Company shall not be restricted on the set off of capital allowance accumulated during its tax relief period against its assessable profits in the periods following the end of its relief period.
The guarantees and assurances set out in the Second Schedule to this Act shall have effect with respect to the shareholders of the Company and the Company.
In this Act, unless the context otherwise requires–
“LNG” means liquefied natural gas.
This Act may be cited as the Nigeria LNG (Fiscal Incentives, Guarantees and Assurances) Act.
FiRST SCHEDULE [Section 2.]
Early termination of tax relief period
(a) for each period ended on an anniversary date, calculate the annual average sales price of liquefied natural gas by dividing the total invoiced sales of liquefied natural gas in the twelve months ending on the anniversary date in US$, by the total invoiced deliveries of liquefied natural gas in Millions of British Thermal Units, in the same period;
(b) calculate the Nigeria LNG Index for each of the periods between the production day and the anniversary date, by multiplying the US Dollar/SDR index at the end of each period with the CPI at the same date, dividing the result by 1.9924344, or such other denominator as gives an answer of 100 for 31 December 1987, in the event that the CPI is rebased;
(c) divide the annual average sales price for each period—
(i) by the Nigeria LNG Index for the same period;
(ii) to calculate the adjusted price for the period;
(d) calculate the cumulative average sales price for the period from the production day to the anniversary date by dividing the sum of the adjusted prices (c) for each period from the period in which the production day falls to the period which ends with the anniversary date by the number of such periods.
(a) anniversary date means the anniversary of the Production Day and each anniversary thereof until the ninth anniversary;
(b) the US Dollar/SDR Index shall be the figure published by the International Monetary Fund in the publication titled “International Financial Statistics” for the end of the month in which the anniversary date falls for the United States dollar/Special Drawings Right Index (series “su United States”) or if that publication ceases then in its successor or a comparable United States publication of good standing; and
(c) the CPI shall be the figure published by the International Monetary Fund in the “International Financial Statistics” for the end of the month in which the anniversary date falls for the Industrialised Countries Consumer Price Index (series 110) or if the publication ceases then in its successor or a comparable United States publication of good standing;
(d) period means 365 calendar days (366 in a leap year) preceding an anniversary date.
SECOND SCHEDULE[Section 9.]
Guarantees and assurances to Nigeria LNG limited and its shareholders [1993 No. 113.]
The Federal Government of Nigeria (in this Act referred to as “the Government”) in recognition of the magnitude of, and in consideration of the investments which shall have to be made in order to prosecute the venture described in the shareholders’ contract dated 19th May, 1989 between the Nigerian National Petroleum Corporation, Shell Gas B.Y., CLEAG Limited and Agip International B.Y., as amended, from time to time (such shareholders’ contract, as so amended in this Act referred to as “the contract”) hereby grants to the Company, its successors and to each of the shareholders, from time to time (in their capacity as such), the guarantees, assurances and undertakings following hereunder. These guarantees, assurances and undertakings shall have effect from the date hereof, and so long as the Company, or any successor thereto, is in existence and carrying on the business of liquefying and selling liquefied natural gas and natural gas liquids within and/or outside the Federal Republic of Nigeria.
The guarantees and assurances are as follows–
(a) the grant of any licence or permit required for the importation or exportation of plant material, equipment and products of the Company;
(b) the grant of permits, licences required for the construction, start-up and operation of the facilities;
(c) the customs formalities in respect of imports and exports (not including personal effects) required in connection with the construction, operation and maintenance of the Company facilities and products; and
(d) the prompt registration and certification by the National Office for Technology Acquisition and Promotion of all contracts for the transfer of technology to the Company by its advisers, contractors and sub-contractors in accordance with the National Office for Technology Acquisition and Promotion Act, accordingly the provisions of subsection (2) of section 6 of the said Act, shall not be applicable to any of the afore-mentioned contracts.
(a) the capital dredging of the Bonny bar channel by the Company and the maintenance dredging by Government;
(b) Government’s responsibility to provide and maintain the navigational aids for the Bonny bar channel;
(c) Government’s responsibility for providing a fully comprehensive traffic control system for Bonny port;
(d) Government’s responsibility for ensuring that all traffic in the Bonny channel shall carry a pilot and allocation of top graded pilots to the venture;
(e) the Company’s responsibility for ensuring the safety and protection of the designated safety zone around the LNG berth with the assistance and co-operation of the law enforcement agencies;
(f) the Company’s responsibility to provide, operate and maintain the tugs, mooring boats and patrol crafts required for the venture; and
(g) if, in the Company’s opinion, the activities for which the Government is responsible, pursuant to sub-paragraph (a), (b) and (c) of this paragraph, are not carried out in such a manner as to satisfy the Company’s requirements, the Company shall have the right to arrange for the necessary activities to be carried out.
(2) The Company and the Nigerian Ports Authority acting on behalf of Government shall liaise and co-ordinate their respective activities to ensure the successful implementation of the sub-paragraph (I) of this paragraph.
(3) The capital costs incurred by the Company in fulfilling the responsibility allocated to it pursuant to sub-paragraph (1) (a) of this paragraph and in providing navigational aids for the Bonny bar channel and traffic control facilities to be used by Nigerian Ports Authority on behalf of Government in fulfilling Government’s responsibilities pursuant to sub-paragraphs (I) (b) and (c) of this paragraph and any costs incurred by the Company for activities undertaken by the Company pursuant to sub-paragraph (1) (g) of this paragraph shall be borne by the Nigerian Ports Authority and shall be reimbursed to the Company on terms to be agreed between the Nigerian Ports Authority and the Company in good faith.
Provided that no conditions shall be attached to any such grant requiring the Company to generate and supply electrical power for any purpose other than to meet the requirements of the venture for power supply to the LNG plant, the Company’s other facilities area at Bonny and the Company shall not be obliged to supply power to the Nigeria Electricity Power Authority for local distribution or otherwise.
In the event of failure to reach amicable settlement within 90 days of the date of the letter of notification mentioned above, such dispute may be submitted to arbitration before the International Centre for the Settlement of Investment Disputes.
No Subsidiary Legislation