Global Tax Alert (News from Transfer Pricing) | 21 March 2014

Nigerian Tax Authorities issue transfer pricing guidance and forms

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Executive summary

Nigeria's Federal Inland Revenue Service Transfer Pricing (FIRS TP) Division is responsible for implementation of the country's new Income Tax Transfer Pricing Regulations No.1 2012 (TP Regulations). Recently, the FIRS TP Division took significant steps in its administration of Nigeria's new TP regime. Specifically, the Division has:

  • Requested that taxable persons maintain and submit their TP policy documents in addition to TP documentation; and
  • Clarified the process for completing the annual TP returns, as well as publishing updated TP declaration and TP disclosure forms.

Detailed discussion

Nigeria's transfer pricing compliance process

The transfer pricing compliance process in Nigeria is now composed of the following:

  • TP documentation: Taxable persons who engage in transactions with connected taxable persons are required to maintain contemporaneous transfer pricing documentation to justify the arm's length nature of the pricing of such transactions. The TP Regulations require that the TP documentation is in place prior to the due date for filing the income tax return of the year in which the transactions occurred. However recently published FIRS guidance has indicated the FIRS expects taxable persons to start maintaining documentation at the time the transaction is taking place i.e., contemporaneously. In practice, it is expected the FIRS will not ask for TP documentation until after the filing of the tax return, though as indicated, it expects such documentation to be in place at the time the transactions occurred to enable arm's length pricing.
  • TP policy: In addition to TP documentation, taxable persons are required to maintain transfer pricing policy documents (both Group and Domestic policies), which are to be submitted with the first annual transfer pricing return, and updated when there are material changes to the policy.
  • Annual TP returns: An annual TP Return must be submitted at the time of filing the annual income tax return, and consists of the following:
  • TP disclosure form
  • Audited financial statements
  • Copy of income tax self assessment
  • Tax computation with all schedules

In addition, for the first year of submission of TP returns, the TP policy documents and TP declaration form must also be submitted. The FIRS guidance indicates that these documents would only need to be updated when there are material changes to the information contained in them.

Transfer pricing policy requests

The FIRS TP Division has begun sending out requests to taxpayers subject to the TP Regulations, asking such taxpayers to submit their group and domestic transfer pricing policy to the division within 30 days.

The requirement to maintain and submit a TP policy is not included in the TP regulations and so these requests have caused some uncertainty among taxpayers. However the FIRS recently clarified its position in the guidance published on its website and at an event it held for stakeholders.

The FIRS guidance indicates every taxpayer subject to the TP regulations is required to document its TP policy at both Group and Domestic levels and submit such policy to the FIRS either within 21 days upon request or, if no request is made, at the time of filing their first TP returns.

The FIRS guidance indicates that a Group TP policy refers to the set of principles adopted by the group upon which the pricing of intra-group transactions are based, depending on the objectives being pursued by the group. The guidance indicates that a Domestic TP policy differs from the Group TP policy by taking into consideration the requirements of the country's TP legal framework.

The FIRS view of what a TP policy should contain differs from the type of policy documents most multinational groups maintain. Such policy documents are often in the form of an internal manual that provides guidance on how transactions are to be booked within the group, whereas the FIRS expects a TP policy will contain information on the TP methods and the comparables used to assess arm's length pricing. Companies may therefore need to prepare specific policy documents in order to comply with the FIRS request, as existing internal documents are unlikely to fully address those expectations.

Declaration and disclosure forms

The FIRS has published updated versions of the TP disclosure form and TP declaration form, including guidance on how to complete the forms.

The TP disclosure form requires the provision of information about all the taxpayers controlled transactions, including transaction volumes and the transfer pricing methods used to support the arm's length nature of the transactions. It also requires provision of basic financial information from the financial statements of the reporting entity and its consolidated group.

The TP declaration form requires the provision of information about the reporting entity, its parent, subsidiaries, ownership structure, major shareholders, and directors.


These recent communications indicate the FIRS is continuing its strong commitment to the enforcement of the TP regulations, and the transfer pricing regime in Nigeria is shaping up to be one of the more comprehensive regimes globally.

Affected taxpayers would be advised to take immediate action to ensure they have their transfer pricing policy, documentation and returns completed in time to meet the above-noted deadlines.

For additional information with respect to this Alert, please contact the following:

Ernst & Young Nigeria, Lagos
  • Akinbiyi Abudu
    +234 806 240 4902
  • Patrick Oparah
    +234 811 319 0129

EYG no. CM4286