Transcript special briefing to the korean business community - ACAS-LAW

SPECIAL BRIEFING TO THE KOREAN
BUSINESS COMMUNITY
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Table of Contents
I. WHO WE ARE - ADEPETUN CAXTON-MARTINS
AGBOR & SEGUN (“ACAS”)
II. NIGERIA: POLITICAL AND ECONOMIC
III. NIGERIA: DEVELOPMENTS IN THE OIL & GAS SECTOR
IV. NIGERIA: KEY TAX REFORMS
V. NIGERIA: SOME INVESTMENT APPROVALS, PERMITS
& INCENTIVES
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Who we are
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WHO WE ARE
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Founded 1st April, 1991.
Full service commercial law practice.
40 Lawyers including 8 Partners.
Offices in Lagos, Abuja & Port Harcourt.
The firm’s commercial law practice offers a
one stop solution.
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Our Practice Groups
ACAS
International
Trade, Shipping
& Litigation
Corporate
Commercial
Department
Energy and
Project Finance
Group
Adcax Nominees Limited
(Dedicated company
Secretarial Services)
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Our Services
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Energy & Project Finance Group
* Establishment & Corporate Structuring of
E&P, service and power companies
•Oil & Gas Industry Accreditation Procedures
•Concession acquisitions & disposals
•Oil & Gas and Power Project structuring and
Development
•Power and Oil & Gas Project Financing
Advisory Services
•Foreign Investment Advisory Services
•Petroleum Taxation Advisory Services
•Asset and General Corporate Legal Due
Diligence Investigations
•Preparation, Review & Negotiation of Oil
Industry/Power Industry Technical Agreements
•Legislative & Regulatory Compliance Advisory
Services
International Trade, Shipping & Litigation
•Establishment of shipping companies
•Shipping & Admiralty Litigation &
Arbitration
•Commercial Litigation
•Land/Property Acquisition & Litigation
•Ship Detention & Releases
•Marine Insurance , Collision Claims, Cargo
Loss & International Trade Disputes
•Oil Spill Claims & Litigation
•Debt & Finance Recovery
•Ship Registrations, Mortgages & Financing
•General Marine Enquiries & Claims
•Aviation Leasing, Licensing & Financing
•Cabotage Compliance Advisory Services
•Labour Law Advisory Services
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Our Services
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Corporate & Commercial Practice Group
•Mergers, acquisitions and divestments
•Private Equity Investments, Capital Market
•Banking transactions and Advisors Services
•Intellectual Property Registrations &
Advisory Services
•International Project Financing ,Corporate
Finance
•Immigration Advisory Services
• Telecommunications, Transport &
infrastructure
•Insurance, Commercial Arbitration, Real
Estate
•Tax Advisory Services, Corporate
Governance
Adcax Nominees Limited (Dedicated
company Secretarial Services)
General Company
Formation/Secretarial Services
•Filings & Registrations with the
Corporate Affairs Commission
•Nominee Directors Services
•Corporate Governance/Compliance
Issues
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Relevant Listings
• “Energy/Natural Resources Law Firm of the Year” – Nigerian
Legal Awards, 2010 (ESQ. & Business Day)
• “Nigerian Energy Law Firm of the Year 2010”- 2010 Global
Law Experts Awards
• “The Most Gender-Friendly Law Firm of the Year 2010”Nigerian Legal Awards, 2010 (ESQ. & Business Day)
• “Oil & Gas Law Firm of the Year for the African Region” – ACQ
Finance Magazine Law Awards, 2009
• One of the leading Nigerian Banking & Finance,
Corporate/Commercial, Dispute Resolution and Energy &
Natural Resources Law Firms – The Chambers Global Guide,
the World’s Leading Lawyers – 2001 till date.
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Nigeria: Political and Economic
Outlook
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Political and Economic
Outlook
 Political Situation
-The year 2012 started with a 2 week industrial action and protests against the
removal of subsidy on Premium Motor Spirit
- The industrial action was called off/partial removal of subsidy on PMS from
N142 to N97 as against the N65 at which it was sold prior to the removal;
-Investigations into Subsidy theft disclose N6.8 billion lost from 2009 to 2011;
-Government vows to investigate & prosecute persons implicated in report.
 Economic Furtherance
-Budget of 4.697 Trillion signed recently; based on price of $72 per barrel
-1.34 Trillion Capital Expenditure & 3.35 Trillion Recurrent Expenditure;
-Foreign reserve increased from 3.3 Billion at end of 2011 to 37.3 Billion as at 18th
May, 2012 due primarily to the rise in international oil prices and partial
removal of subsidy.
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Nigeria: Political and Economic Outlook Cont
.
 Fall in imports of petroleum products & cut in subsidy & improved
management of economy:
-CBN fixed exchange rate at N155.57 to US$1;
-Increasing crude oil theft, sabotage & pipeline leakages especially in Shell
operated facilities in the Niger Delta;
-Oil Production dipped to 2.15 Million barrels per day in first quarter;
-Total’s Usan deepwater field will increase production by 180,000 barrels a day.
 Slow consumer demand continues:
-Economy dragged by weak consumer demand in Q1;
-Lagos Chamber of Commerce and Industry (“LCCI”) in review of economy cited
inadequate power supply as biggest burden on economy;
-LCCI also concerned with Nigeria’s debt practice- US$41 Billion at December,
2011 out of which domestic debt was US$35 Billion;
-CBN predicted a GDP growth of 6.5% for 2012 against IMF’s prediction of 7.1%
and 7.45% achieved in 2011
 CBN also noted that proposed upward review of electricity import tariffs on wheat &
rice and rising food & energy prices could put further pressure on prices in near term
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Nigeria: Political and Economic Outlook Cont
.
 Information and Communications Technology Development
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The FGN has banned the Public Sector Purchase of Foreign made
Computers and technology products by public institutions including
Ministries, Departments, Eservices and Public Schools in the Country;
Move to encourage patronage of made in Nigeria computer products &
growth in local ICT Industry;
Multinational companies are encouraged to set up production of assembly
plants to benefit from this policy;
With more than half the population of West Africa, Nigeria has a large
market to justify FDI in information technology;
It is now an offence punishable by imprisonment, fine or both for public
procurement of non-made in Nigeria computers and IT products where
certified local brand exists
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Nigeria: Political and Economic Outlook Cont
.
 Launch of Nigcombat 1-R- to Geostationary Orbit:
- With launch of Nigcombat, Government to use platform to create ICT parks and
hotspots in every Local Government in the Country;
-Government to give software training to 10,000 youths for states, annually for
the next 5 years;
-Government plans to leapfrog Nigeria into a giant in software development in
Africa and the world;
-Nigeria spends US$500 Million per year to import software application, India
earns US$50 billion from software writing.
 Status of the Privatisation of PHCN
- Bureau of Public Enterprise (BPE) fixes dates for bids for privatisation of PHCN
- Deadline for the submission of technical and financial proposal
17th July, 2012 for generation companies
31st July, 2012 for distribution companies;
- Technical evaluation of bids – 14th August, 2012
- 11th September, 2012, announcement of result on the technical evaluation by
National Commission on Privatisation (NCP)
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Nigeria: Political and Economic Outlook Cont
.
 18th September, 2012 and 2nd October, 2012 are respectively scheduled as deadline for
submission of letters of credit by successful bidders for generation companies and
distribution companies
 The BPE recently issued the following transaction documents to potential investors
 Financial bids to open between 25th September, 2012 and 10th October, 2012
 Preferred bidders to be announced by NCP on the 23rd October, 2012.
 BPE issued the following transaction documents to the potential investors
 Share Sale Agreement
 Shareholders Agreement
 Performance Agreement
 Concession Agreement
 Gas Sale and Aggregation Agreement
 Gas Transportation Agreement etc
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Nigeria: Political and Economic Outlook Cont
.
- With budget signed, indications are that the economy will
move faster in the second quarter;
- Key to this develoment will be timely release of budget
allocation for effective budget implementation by Ministries,
Departments & Agencies;
- For good progress, the Government has to negate the menace
of Boko Haram;
- Need to fast track infrastructure development including sale of
PHCN succession companies;
- With improved electricity & security will attract more
Investors
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Nigeria: Development in the Oil and
Gas Sector
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Nigeria: Development in the Oil and Gas Sector
 Government to conclude Renewal of oil licenses by June;
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FGN to renew oil licenses of Chevron and Shell in this month (June);
Shell is the biggest oil operator with assets that can produce 1 million barrels per day;
Exxon Mobil signed a 20 year license renewals on assets producing 550 barrels per day in
February;
Several onshore licenses that expired in 2008 have been in negotiations with the
Government;
 Government is reluctant to renew oil licences because of Petroleum Industry Bill (“PIB”):
-PIB to net Government increased royalties and taxes;
-Regulatory uncertainties due to non-passage of PIB- Govt had no choice but to renew licences;
 Gas flared drops to 14%;
-NNPC reported that dropped from 19% to 14% of 215.84 billion standard cubic feet (bsaf) of gas
produced in January, 199.41 was used, only 30.16 bsaf or 13.97 of total gas production was
flared;
-Decrease due to increased used of gas for power generation, export and industrial applications;
-Only 13.97% of total gas production if offshore fields in January;
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The Petroleum Industry Bill 2012 (“PIB”)
 STATUS
– the PIB has passed the first and second reading stages in the National
Assembly. The final draft of PIB has been submitted to the National
Assembly for further deliberation.
 OBJECTIVES 
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enhance exploration and exploitation of petroleum resources in Nigeria
Promotion of petroleum production for the benefit of the Nigerian people
Encourage further investment in the petroleum industry
Promote transparency, simplicity and openness in the petroleum industry
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Consolidation of all Nigerian oil and gas legislation – single law

Restructuring Of Institutional & Regulatory Entities
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Highlights of the PIB
• Removal of the confidentiality obligations and the entrenchment of
transparency in the administration of the Industry;
• Definition of an “indigenous company” as one which, among other things,
is “engaged in upstream activities of which 60% or more of its shares are
beneficially owned directly or indirectly by Nigerian citizens or
associations of Nigerian citizens”;
• Proposed incorporation of the Nigerian National Petroleum Company
Limited as a successor to the assets and liabilities of the NNPC;
• Introduction of separate licenses for oil and gas;
• Every upstream company would now be required to pay corporate income
tax, in addition to petroleum tax, without exception; introduction of
Nigerian Hydrocarbon Tax ;
• It proposes to discard the use of investment tax credits and investment tax
allowances which were key fiscal incentives in getting the IOCs to consider
exploring ultra deep water acreages;
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The Nigerian Oil and Gas Industry Content
Development Act 2010 (the Local Content Act)
• Designed to promote local participation in the Nigerian oil and gas
industry.
• Consequently, Nigerian content is a major criterion in the award of
contracts.
• Nigerian independent operators to be given first consideration in
the award of oil blocks, licenses, lifting contracts and all projects for
which contracts are to be awarded.
• Nigerian indigenous service companies to be given exclusive
consideration to bid on land and swamp operations.
• No definition for “Nigerian Independent Operators” or “Nigerian
Indigenous Service Companies”.
• Nigerian company is defined as “A company formed and registered
in Nigeria in accordance with the Companies and Allied Matters Act
with not less than 51% equity shares by Nigerians”.
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The Local Content Act
 Partnership with Nigerians is Desirable
 Benefits:
- To comply with the definition of a Nigerian company; and
- take advantage of the preferential treatment enjoyed by
Nigerian companies.
 Significant Challenges:
- Where high value assets are to be deployed and local
partners with resources to invest are required- Key relevant provision: “International/multinational
companies working through Nigerian subsidiaries must
demonstrate that a minimum of 50% of the equipment
deployed for execution are owned by the Nigerian
subsidiaries”.
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The Local Content Act:
Attitude of the NCDMB
• The Act allows for a 3 year exemption to be given on
application.
• The NCDMB are pragmatic in their approach and do
not insist on strict compliance e.g the asset ownership
requirement.
• 51% of Nigerian ownership is not insisted on at the
outset.
• Corporate vehicle through which the equipment is
owned could be a foreign entity.
• Adequate protection can be obtained through creative
planning (legal and tax) of a joint venture with local
partners.
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Local Content Act:
Some Highlights
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Bid with highest level of Nigerian content should be selected where bids are within
1% of each other at commercial stage;
Nigerian Indigenous Company with capacity to execute projects not to be
disqualified where its bid does not exceed lowest bid price by 10%;
1% of every contract awarded to any Operator, Contractor, Subcontractor, Alliance
Partner to be deducted at source and paid into the Nigerian Content Fund;
Operators, Contractors and Subcontractors to maintain a Bank Account in Nigeria
and retain a minimum of 10% of its total revenue accruing from its Nigerian
operations in such account;
Fine of 5% of contract value for non-compliance with the Nigerian Content Act or
cancellation of the project;
The NCDMB’s approval is required for grant of expatriate quota;
All fabrications and welding activities to be carried out in Nigeria;
Company can maintain 5% of management positions for investor protection;
Insurable risks required to be insured in Nigeria;
Only services of Nigerian legal practitioners can be retained; and
Expatriate quota positions are required to be “Nigerianised” in four years.
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Nigeria: Tax Reforms and Relevant
Treaties
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KEY NIGERIAN TAX REFORMS
PERSONAL INCOME TAX (AMENDMENT) ACT 2011 (PIT)
 PIT is a tax imposed on the incomes of individuals or employees
 employers have an obligation to deduct the PIT from employees
remuneration and remit to the relevant state tax authorities
 MAJOR CHANGES TO ACT
- Consolidation of Personal Relief Allowance is now N200,000 or 1% of an
individual’s annual gross income whichever is higher plus 20% of the
individual’s annual gross income
Taxation of Expatriate Income
 The basis for determining the tax liability of an expatriate are as follows:
i. employer based in Nigeria
ii. employer has fixed based for doing business in Nigeria; and
iii. where the duties of any employment are wholly or partly performed in
Nigeria, for an aggregate of 183 day.
 in computing the 183 days residency rule, periods of temporary leave of
absence is considered
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KEY NIGERIAN TAX REFORMS
 Duty to Keep Books of Account
failure or refusal to keep adequate and proper books of accounts for purposes of
computing Personal Income Tax is an offence.
Penalty – N50,000 for individuals and
N500,000 for corporate employers
 Penalty for failing to deduct or remit Personal Income Tax
a) 10% of the sum not deducted or remitted;
b) paying the tax withheld or not remitted; and
c) interest at the prevailing Central Bank of Nigeria Rate paid on (a) and (b)
 Recommendations:
Tax authorities are now very “zealous” in enforcing tax obligations and auditing
companies to check their level of compliance;
Companies to review tax compliance structures to align with the new PIT Act
develop a document retention policy of a minimum of six years
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KEY NIGERIAN TAX REFORMS
INDUSTRIAL TRAINING FUND (AMENDMENT) ACT 2011
• AIM
 every employer of labour to contribute 1% of the annual payroll of its
employees to the fund;
 Fund shall be used to provide, promote and encourage the acquisition of
skills of indigenous trained manpower sufficient to meet the needs of the
private and public sector
 Provision of training for skills in management and technical
entrepreneurial development
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KEY NIGERIAN TAX REFORMS
Major changes in the Act
 Power to appoint agents
 Applicable to establishments with a minimum of 5 employees or N50m annual turnover
if employees are less than 5
 Penalty for failure to make relevant returns
- for a corporate entity, N500,000.00 for first breach and N1m for each subsequent
breach;
- for principal officers of the entity, N50,000 or 2 years imprisonment for first breach and
two years imprisonment without option of payment of fine for each subsequent
breach.
 Definition of employees to include expatriates
 Payroll defined as “the sum total of all basic pay allowances and other entitlements
payable within and outside Nigeria to any employee in an establishment, public or
private”.
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KEY NIGERIAN TAX REFORMS
• COMPANIES INCOME TAX ACT (“CITA”)
 The proposed amendment to the CITA is before the National Assembly and has
Passed the first and second reading stages. It is currently awaiting the third and
final reading .
 The amendment is aimed at :
i. promoting economic growth, employment and reduction of rural-urban
migration
ii. Providing additional tax incentive for gas utilization and mining sector
iii. Increasing rural investment allowance – 10% to 20% ;
iv. Introducing a 10 year tax holiday to any Company established in areas with no
electricity, water or tarred road provided by the Government; and
v. Increasing the tax free period of 2 years to 5 years for mining companies and
from 5 years to 7 years for companies engaged in gas utilization
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KEY NIGERIAN TAX REFORMS
• Tax Administration (Self Assessment) Regulation
2011
 taxpayers to compute their tax liabilities, file and make payment concurrently
on or before the due dates
 Key changes introduced by the Regulations:
i.
Filing of Tax Return: filing of tax returns may be done personally by the
taxpayer or through an accredited agent.
ii. Penalty and Interest on Non/Late Payment: Where a taxpayer fails to file
returns or pay the tax due, the relevant tax authority shall impose penalties.
iii. Extension of Time: A taxpayer may apply for extension of time to file
returns.
iv. Instalmental Payment: A taxpayer is required to notify the relevant tax
authority of its intention to make instalmental payment of its taxes for any
relevant year of assessment.
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BILATERAL INVESTMENT PROTECTION AGREEMENT BETWEEN THE FEDERAL REPUBLIC
OF NIGERIA AND THE REPUBLIC OF KOREA
.
Objectives
- To encourage and create
favorable conditions for
investments;
- To provide fair and equitable
treatment of investments.
Dispute Resolution
i. Diplomatic channels
ii. Arbitral Tribunal
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Some Protection Offered
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Creation of favourable investment conditions for contracting
states;
Fair and equitable treatment including full protection and
security in the territory of the other contracting party;
No discrimination;
Nigeria shall grant the necessary permits in connection with
investments and with carrying out of contracts of license and
technical, commercial or administrative assistance, activities of
consultants;
Korea national’s investments that suffer loss owing to war or
other armed conflict shall be adequately compensated;
Korea national’s investment shall not be nationalized or
expropriated except for a public purpose and in such instance,
adequate compensation shall follow
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Double Taxation Avoidance Treaty between the Federal Republic
of Nigeria and Republic of Korea

Was entered into on 6 November 2006.

There is a bill before the National Assembly for its ratification.

The treaty re-establishes the non-discrimination policy, defines permanent
establishment and provides for the treatment of taxation between Nigeria and
Korea among others.

Section 45 CITA and 38 PITA allow for the implementation notwithstanding
ratification but subject to ministerial order. We are not aware of any ministerial
order regarding the DTT between Nigeria and South Korea.

Under international law, a treaty is enforceable as between the contracting
states hence the DTT agreement between Nigeria and south Korea is
enforceable against the Nigerian government in accordance with its terms.

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Benefits:
Withholding tax at 7.5% on dividends, interest, royalties etc
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Nigeria: Some Investment Approvals,
Permits & Incentives
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SOME INVESTMENT APPROVALS,
PERMITS & INCENTIVES
 Business Permit : every company with foreign participation in Nigeria is required to
obtain this permit before commencement of operation.
 Expatriate Quota: foreigners working in Nigeria are required to be granted this
before commencement of such work.
 The Nigerian Petroleum Industry Offshore Safety Permit –
- ensure safety of offshore personnel
- the Department of Petroleum Resources (“DPR”) issues the Offshore Safety
Permits (“OSP”) ;
- West Atlantic Energy Limited is DPR’s accredited agent for issuance of OSPs; and
- All Exploration and Production Companies, as well as Oil Service Companies having
operations and personnel working in offshore areas of the Industry shall apply for
issuance of OSPs.
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INCENTIVES
 Fiscal Policy Measures 2012
With effect from 31st January, 2012, the Federal Government approved the
release of the following Fiscal Policy Measures:
-
Zero percent (0%)duty charge on Agricultural machinery and equipments;
and
Zero percent (0%)for Power sector equipment and machinery
 The Free Trade Zone
Every company operating within the free trade zone is exempt from all
federal, State and Local government taxes, levies and rates for activities
within the zone.
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INCENTIVES CONTD
 PIONEER STATUS:
This takes the form of a five-year tax holiday to qualifying
industries anywhere in the federation.
Over 69 industries and products are granted pioneer status.
Some of these are:
• Companies engaged in the manufacture of oil well drilling
materials containing a predominant proportion of Nigerian
raw materials;
• Companies engaged in the manufacture of vehicles.
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INCENTIVES CONTD
• Companies engaged in the manufacture of electrical
appliances/ equipment/components and parts;
• Companies engaged in Ship building, repairs and
maintenance of ocean going vessels – ships, boats and
barges;
• Companies engaged in Manufacture of Solar energy
powered equipment and gadgets - Solar panels,
refrigerators, water pumps, calculators, etc;
• Companies engaged in information and communication
technology (ICT) – manufacture/production of ICT
equipment, hardware and software. There is no doubt
that this is aimed at encouraging more local production
(or assemblage) of these materials.
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Thank you
감사합니다
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Contact Information
Afolabi Caxton Martins
Adepetun Caxton-Martins Agbor & Segun
9th Floor St. Nicholas House
Catholic Mission Street
Lagos
Email: [email protected]
Tel:
+234-1-4622094, 4622480, 7406743
Mobile: 234 803 304 6616
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