Section 302: General requirement of companies engaged in petroleum operations to pay companies income tax.Cap. C21,LFN, 2004.

1 Without prejudice to Companies Income Tax Act and any other applicable law, the
provisions of this Act shall apply and any company, concessionaire, licensee, lessee, contractor or subcontractor involved in the upstream, midstream or downstream petroleum operations under this Act, shall also be subject to the Companies Income Tax Act


2 For the purpose of determining the value of chargeable crude oil, or chargeable gas, in relation to any accounting period, the crude oil and gas revenue of a company for that period shall be the value of any chargeable oil or chargeable gas adjusted to the measurement points, based on the-
a proceeds of all chargeable oil or gas sold by the company; and
b value of all chargeable oil or gas disposed by the company.

3 Subject to sections 142 (2) and 197 (2) of this Act, a person intending to be involved in more than one stream, that is upstream, midstream or downstream petroleum operations shall register and use a separate company for each stream of petroleum operations under this Act provided that, for companies with petroleum mining leases selected under section 93 (6) (b) and (7) (b) of this Act, no stamp duties and capital gains tax shall be levied by Government on such segregation.

4 For strategic projects in the upstream petroleum operations that seek to produce oil and natural gas to be processed or refined to finished petroleum products, and supplied in wholesale solely to the domestic market, such projects shall have the option to be established as an integrated strategic project (ISP), whereby the capital investment in the associated midstream petroleum operations as defined under this Act, can be consolidated with the upstream petroleum operations for purposes of tax, and where an ISP option is elected, the following provisions shall apply-
a arms-length transfer prices shall be established to fiscalise the hydrocarbons transferred from the upstream petroleum operations to the midstream petroleum operations; and
b capital investment in the midstream petroleum operations consolidated with upstream petroleum operations cannot be represented for capital allowances when fiscalising the income from midstream petroleum operations.

5 In determining the companies income tax, the hydrocarbon tax under this Act shall not be deductible.

6 All companies engaged in domestic midstream petroleum operations, downstream gas operations and large-scale gas utilisation industries as defined in this Act, shall be entitled to benefit from the incentives provided under section 39 of the Companies Income Tax Act, and investors in gas pipeline will be granted an additional tax-free period of five years at the expiration of the tax-free period granted in section 39 of the Companies Income Tax Act

7 Natural gas transferred or disposed from the upstream to the midstream or downstream shall be subject to tax under the Companies Income Tax Act.

8 Natural gas liquids and liquid petroleum gases derived from natural gas shall be subject to companies income tax.

9 Acquisition costs of petroleum rights shall be eligible for annual allowance at the rate of 20% with a retention value of 1% in the last year until the asset is disposed.

10 Capital allowances for other assets shall be granted as follows-
a upstream petroleum operations assets shall be in accordance with the Fifth Schedule to this Act; and
b midstream and downstream operations shall be in accordance with the Second Schedule to the Companies Income Tax Act.

11 Section 24 ofthe Companies Income Tax Act shall be read in conjunction with the following provisions of this Act-
a all rents and royalties the liability for which was incurred by the company during that period in respect of crude oil sold, condensate sold and natural gas sold or delivered or disposed of in any other commercial manner and where a petroleum mining lease includes payments to the Federation Account related to production sharing, profit sharing, risk service contracts or other contractual features and the company has incurred liability for such payments and such payments were made;
b
any amount contributed to any fund, scheme or arrangement approved by the Commission or Authority for the purpose of providing for —
(i) abandonment and decommissioning,
(ii) petroleum host communities development trust, or
(iii) environmental remediation; and
c other deductions as may be prescribed by the Minister of Finance by order published in the Federal Government Gazette.

12 Section 27 of the Companies Income Tax Act shall be read in conjunction with the following provisions of this Act-
a any expenditure for the purchase of information relating to the existence and extent of petroleum deposits, other than for the acquisition of geological, geophysical and geochemical data or information;
b any expenditure incurred as a penalty including natural gas flare fees or any such imposition relating to natural gas flare;
c
production bonuses, signature bonuses paid for the acquisition of, or of rights in or over, petroleum deposits; signature bonuses or fees paid for renewing petroleum mining lease or petroleum prospecting licence or fees paid for assigning rights to another party including for marginal fields; and
d any tax inputted into a contract or an agreement on a net tax basis and paid by a company on behalf of the vendor or contractor.

13 Any company involved in upstream petroleum operations shall apply the accounting periods established for hydrocarbon tax on an actual year basis for its company's income tax in accordance with sections 277, 280 and 291 of this Act.

14 Any company involved in upstream petroleum operations that is in default of subsection (13) in relation to filing of companies income tax returns, shall be liable to pay a penalty for late filing as follows-
a N10,000,000 on the first day the failure occurs and £42,000,000 for each and every subsequent day in which the failure continues; or
b other sum as may be prescribed by the Minister of Finance by order published in the Federal Government Gazette.

15 Offences and penalties specified under Part IX of this Chapter shall be applicable to companies income tax of upstream petroleum companies.

16 The tax due from a company involved in upstream petroleum operations shall in the case of-
a Naira remittances, carry interest at the prevailing NIBOR plus 10% from the date when the tax becomes payable until it is paid, and

b foreign currency remittances, incur interest at the prevailing LIBOR or any successor rate plus 10% from the date when the tax becomes payable until it is paid,
and the provisions of this Act relating to collection and recovery of tax shall apply to the collection and recovery of the interest.

17 Furthermore upstream petroleum operations shall be subject to the following provisions-
a where, for any accounting period of a company, the amount of the chargeable tax for that period, calculated in accordance with this section other than this subsection, is less than the amount mentioned in paragraph (b), the company shall be liable to pay an additional amount of chargeable tax for that period equal to the difference between those two amounts;
b the amount referred to in paragraph (a) is, for any accounting period of a company, the amount which the chargeable tax for crude oil or gas for that period, calculated in accordance with this section, would come to if the reference in subsection (2) (a) and (b) , to the proceeds of sale or disposal were a reference to the amount obtained by multiplying the number of barrels of that crude oil or gas determined at the measurement point by the fiscal oil per barrel or fiscal gas per MMBtu;
c for the purpose of paragraph (b), the relevant sum per barrel of crude oil, condensate or gas per MMBtu by a company is the fiscal oil price or fiscal gas price applicable to that crude oil or gas as may be established by the Commission;
d the whole of any additional chargeable tax for crude oil or chargeable gas payable by a company by virtue of this subsection for any accounting period shall be payable concurrently with the final instalment of the chargeable tax payable for that period;
e where there is no fiscal oil price or fiscal gas price established for a crude oil stream or gas, the Commission shall establish fiscal oil price or fiscal gas price for such stream and every fiscal oil or gas price established shall bear a fair and reasonable relationship
(i) to the established fiscal oil or gas price of Nigerian crude oil streams or gas of comparable quality and specific gravity, or
(ii) where there are no such Nigerian crude oil streams or gas 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 or gas of comparable quality and gravity, due regard being had in either case to freight differentials and other relevant factors; and

f where any crude oil or gas, which in relation to a particular company is its chargeable oil or chargeable gas, is exported from Nigeria by another company, that crude oil or gas shall for the purpose of this section be deemed to be exported from Nigeria by that particular company.