Transfer pricing - Nigeria

• Nigeria’s FIRS released TP regulations in 2018 which replaced the 2012 regulations.
  
  
• The new regulations were issued to align with the related changes introduced to the 2017 OECD guidelines and the UN TP Manual.

• Nigeria signed the Convention in 2013 and ratified it in April 2015. Further, the application of the provisions of the domestic TP rules is in a manner consistent with the OECD TP Guidelines.
  
  
• However, Part V Regulation 18 states that where any inconsistency exists between the provisions of any applicable laws, rules, regulations, the UN practical manual on TP and the OECD documents referred to in Regulation 18, the provisions of the relevant tax laws shall prevail.

• the Comparable Uncontrolled Price (CUP') method;
  
  
• the Resale Price method;
  
  
• the Cost Plus method;
  
  
• the Transactional Net Margin method;
  
  
• the Transactional Profit Split method; or
  
  
• any other method which may be prescribed by Regulations made by the Service from time to time.

• TP Returns: Taxpayers who are connected person are expected to file returns which is known as TP Declaration and TP Disclosure alongside the corporate tax returns.
  
  
• TP Declaration and Disclosure shall be made and submitted to FIRS not later than eighteen months after the date of incorporation or within six months after the end of the Accounting year, whichever is earlier.
  
  
• TP Documentation: TP documentation is expected to be prepared before the due date of filing annual corporate tax returns. (within 6 months after FYE.) To ensure full compliance, it is expected that the company prepares the documentation beforehand as soon as possible in readiness for submission upon FIRS' request. The documentation is expected to be submitted to the FIRS within 21 days of receiving a request.

• The regulations state that taxpayers ought to prepare contemporaneous documentation substantiating the arm’s length nature of transactions in a format consistent with the OECD guidelines, this includes the Master file, Local file and CbC.

TP Documentation

• A connected person shall record, in writing or on any other electronic device or medium, sufficient information or data with an analysis of such information and data to verify that the pricing of controlled transactions is consistent with the arm’s length principle (documentation) and shall make such documentation available to the FIRS upon written request.
  
  
• A connected person whose total value of controlled transactions is less than three hundred million naira may choose not to maintain contemporaneous documentation; provided that, where the FIRS deems it necessary, it may demand that relevant documentation shall be prepared and submitted not later than 90 days from the date of receipt of a notice from the Service.

CBC Report

• The CbC Report should be filed not later than 12 months after the last day of the Reporting Accounting Year of the MNE Group.
  
  
• The official language for documentation purposes is English.

• Risk of non-disclosure of transaction in the TP Disclosure or TP Documentation, which has a penalty of 1% of the amount not disclosed or N10million whichever is higher.

- Transfer Pricing Declaration:

A connected person who fails to submit a declaration or notification shall be liable to an administrative penalty of N 25 000 for each day in which the failure continues.

- Transfer Pricing Disclosure:

Where any person fails to make disclosures of transactions within the period specified in the regulation, an administrative penalty of N 10 000 000 or one percent of the value of controlled transaction not disclosed, whichever is higher would be imposed and ten thousand naira for every day in which the failure continues.

- Transfer Pricing Documentation:

Failure to submit to the Service TP documentation within 21 days of receiving a request shall attract an administrative penalty of a sum equal to N 10 000 000 or one percent of the total value of all controlled transactions, whichever is higher and ten thousand naira for every day in which the failure continues.

- Late Filing of CbC Report:

Where a Reporting Entity fails to file the Country-by-Country Report on or before the date specified in Regulation FIRS shall impose an administrative penalty of N 10 000 000 in the first instance and N1,000,000 for every month in which the default continues.

- Filing an incorrect or false CbC Report:

Where a reporting entity files an incorrect or false CbC Report, FIRS shall impose an administrative penalty of N 10,000,000.

• The use of comparables depends on the facts and circumstance of the case and the related support of the reliability of the application of the method selected.
  
  
• The onus to prove the arm’s length nature of transaction(s) lies with the taxpayer.

• The regulations allow FIRS to enter into an APA with a taxable person either alone or together with the competent authority of countries of the connected person. This is subject to the publication of guidelines for its implementation.
  
  
• An Advance Pricing Agreement entered into with FIRS shall apply to the controlled transactions for a period not exceeding three years. The APA Guidelines have been published in November 2024.

• The only exemption that exists is relating to the N300 million threshold of transaction between connected persons under the TP Documentation.

• The latest development is the issuance of APA Guidelines in November 2024.