Typically, a Modified Carry Arrangement is where an oil company finances petroleum operations on behalf of all parties to the contract including the NNPC and the oil company is expected to recover its cost partly through tax deduction and partly from oil production.
The contention was whether an oil company can claim tax deductions for cost incurred under a Modified Carry Arrangement. The case was brought before the Tax Appeal Tribunal (TAT) by an International Oil Company (IOC) against the Federal Inland Revenue Service. The TAT ruled that the IOC was entitled to make deductions for tax purposes in computing its taxable profit in accordance with the provisions of the Petroleum Profits Tax Act.
Download PwC Tax Alert_ TAT on Modified Carry Deductions
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