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Paradise Papers: Exposed Zenith Bank Chairman Jim Ovia offers to refund $84 million in one year

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Jim Ovia, the Zenith Bank chairman who was indicted in Paradise Papers, has proposed to refund a total sum of  £10,892,166.00 as the total value-added tax payment he allegedly skipped while importing two luxury jets into the European Union.

According to a report from Nigeria’s Premium Times, Mr. Ovia and Godwin Emefiele, Nigeria’s Central Bank governor, were named among a number of personalities around the world believed to have used artificial leasing schemes to avoid VAT on jets imported into the EU.

Forbes magazine wrote last August that Mr. Ovia raked in around $84.5 million in paper gains last year. The said amount was from shares sold by Zenith Bank, a Nigerian-Stock Exchange-listed commercial bank in which he holds a minority stake – with an increased 59.32%.

Jim-Ovia

Zenith Bank founder Jim Ovia (Source: Premium Times)

Mr. Ovia, a co-founder, chairman, and owner of the highest individual share of more than 9%, established the bank in May 1990 and watched it grow into one of the largest commercial banks in Africa with current market capitalization base of more than $4.2 billion. He served as the bank’s CEO from its inception in 2010 and stepped down from his position in accordance with the Central Bank’s directive which limited the tenure of bank chiefs to a maximum of 10 years.

Speaking in response to the allegations, Mr. Ovia admitted that his bank was the end user of the jet, but stressed that it did not acquire it.

“In order to ensure that there is no misunderstanding, Mr. Ovia has asked us to make clear that no funds of Zenith Bank were used to acquire the aircraft,” Mr. Ovia wrote through his lawyers, Clifford Chance, in a response dated October 27.

“You are aware that professional advice was taken from Ernst & Young LLC at the time of the transaction that VAT was properly recoverable by Oviation Limited. Had the advice been that VAT should not have been recovered in full or in part, we are instructed that the company would not have made the relevant claim.

“Oviation Limited has no reason to doubt the original advice, but if that advise were ever to change, we are instructed that Oviation limited would repay the relevant VAT. This illustrates the good faith at all times of Mr. Ovia.”

The revelations that Mr. Ovia’s companies claimed VAT refunds they do not deserve came to the fore as more than 380 journalists from 96 media organisations in 67 countries scrutinized leaked data obtained by German newspaper, Suddeutsche Zeitung, and the International Consortium of International Journalists (ICIJ) from two offshore secrecy providers (Appleby and Asiaciti Trust) and 19 secrecy jurisdictions around the world.

The leaked 1.4 terabyte data, now dubbed Paradise Papers, contains 13.4 million records and is no doubt one of the biggest leaks in history.

For several months, ICIJ partner media from 67 countries pored over the gigantic data, which cover a period of nearly 70 years, from 1950 to 2016. PREMIUM TIMES is the only Nigerian media organization involved in the investigation.

More than 120 politicians and country leaders, in nearly 50 countries as well as hundreds of business people across the world were identified in the record as users of offshore entities.

According to records seen by this newspaper and other ICIJ partners, Messrs Emefiele and Ovia, between 2007 and 2012, incorporated three offshore entities in tax havens, which were then used to acquire luxury jets and move funds around in cyclical manners that suggested tax avoidance schemes.

The shell companies are Vitesse Asset Management SA (incorporated in Switzerland in 2007); Oviation Asset Management Limited (a Bermuda company established in 2009); and Oviation Limited (an Isle of Man company incorporated in 2012).

Records show that in January 2013, the two bankers acquired a Gulfstream 450 for $33 million and imported it into the Isle of Man, a European territory, where one of their shell companies – Oviation Limited – is domiciled. Oviation Limited then leased it to another of their companies, which in turn leased it to Zenith Bank, the news outlet reported.

Helped by Ernst and Young, a multinational professional services firm headquartered in London, Oviation Limited then registered for VAT in the Isle of Man, and used a deferment account to pay and demand refund of £4,239,178.13 VAT.

Messrs Ovia and Emefiele used a similar scheme when they acquired a $51 million G550 jet in November 2015, and similarly ended up pocketing £6,652,988.36 in VAT refund.

Tax experts and journalists believe that the leasing schemes adopted for these transactions were structured to avoid tax, and that tax authorities should demand repayment of the amount.

They said Oviation Limited, not serving any genuine economic purpose, is not a real business and that the transactions it engaged in were artificial. The company does not have an office or fixed address, staff, telephone lines or computers in its Isle of Man location and is not known to offer any service. The company, the experts contend, therefore does not meet the fixed establishment test (HMRC VAT Notice 741A: place of supply of services).

The experts also explained that under EU and UK tax laws, the two jets imported by the bankers cannot be considered as qualifying aircraft, and that VAT cannot be refunded to private individuals, or exempt companies such as banks. Zenith Bank was an end user of the aircraft.

In the wake of the revelations, Mr. Emefiele had sought to distance himself from the transactions, saying he had since resigned from his position in the shell companies and added that Mr. Ovia alone had been the sole beneficiary.

“At no time did our client derive any personal financial benefit from shares in Vitesse or Oviation Asset Management Limited (“OAML”) or from his directorship of OAML,” Mr. Emefiele said through his London-based lawyers, New Media Law LLP, according to 4-Traders.

“When acting in relation to these companies our client was not acting for his personal financial benefit. Our client acted throughout in relation to Vitesse and OAML at the request of Mr. Ovia.”

On October 23, the Isle of Man Government announced it has invited Her Majesty Treasury to conduct an assessment of the practice for the importation of business jets into the EU through the Isle of Man, with a focus on the VAT treatment of aircraft leasing arrangements.

The government said it had to take that preemptive step following consistent and coordinated enquiries on the matter by media organisations associated with the ICIJ.

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