Transfer Pricing Disclosure (Nigeria)

A Transfer Pricing Disclosure in Nigeria conveys a defined interest from the assignor to the assignee and fixes the effect of that transfer.

The TP Regulations 2018 require that all transactions between connected persons — including parent companies, subsidiaries, associated companies, and any persons with a direct or indirect ownership or control relationship — must be conducted at arm's length prices, meaning the price that would have been agreed between independent parties dealing at arm's length in comparable circumstances. The FIRS may substitute an arm's length price for the actual price where it is satisfied that the transaction was not conducted at arm's length, resulting in additional tax assessments and penalties under Section 22 of the Companies Income Tax Act (Cap C21, LFN 2004).

The disclosure obligation under Regulation 12 of the TP Regulations 2018 requires taxpayers whose aggregate controlled transactions exceed NGN 300 million in a tax year to submit a Transfer Pricing Declaration (TP Declaration) together with their Companies Income Tax (CIT) return. The TP Declaration must be accompanied by a Transfer Pricing Return (TP Return) disclosing the details of each controlled transaction. Taxpayers with aggregate controlled transactions exceeding NGN 2 billion in any three of the preceding five years are also required to maintain and submit a Country-by-Country Report (CbCR) under Regulation 14, consistent with the OECD Base Erosion and Profit Shifting (BEPS) Action 13 recommendations.

Nigeria adopted the OECD Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations (2017 edition) as the primary interpretive reference for applying the arm's length standard in Nigeria under Regulation 4 of the TP Regulations 2018. Acceptable transfer pricing methods include the Comparable Uncontrolled Price (CUP) method, Resale Price method, Cost Plus method, Transactional Net Margin method (TNMM), and Profit Split method, with the taxpayer required to select the most appropriate method for each transaction type.

The legal framework governing the Transfer Pricing Disclosure (Nigeria) in Nigeria draws on several key statutes and regulatory bodies. Under Nigerian law, the Companies and Allied Matters Act 2020 (CAMA) regulates corporate entities through the Corporate Affairs Commission (CAC). The Labour Act (Cap L1 LFN 2004) and the National Industrial Court of Nigeria (NICN) govern employment disputes. The Nigeria Data Protection Regulation (NDPR) 2019 and the Nigeria Data Protection Commission (NDPC) protect personal data. The Federal Inland Revenue Service (FIRS) administers tax obligations under the Companies Income Tax Act. The Federal High Court and state High Courts have jurisdiction over civil matters. Parties executing a Transfer Pricing Disclosure (Nigeria) in Nigeria should confirm the document reflects current law, including any amendments enacted since the original drafting date. The Companies and Allied Matters Act (CAMA) 2020 sets the foundational requirements.

A Transfer Pricing Disclosure is required in Nigeria for every company that enters into controlled transactions with connected persons where the aggregate value of such transactions in the tax year meets the NGN 300 million threshold under Regulation 12 of the Income Tax (Transfer Pricing) Regulations 2018.

A TP Disclosure is required when a Nigerian subsidiary of a multinational group makes inter-company payments to its foreign parent company, including management fees, royalties, licence fees, interest on intra-group loans, or payments for shared services. The FIRS scrutinises such payments to determine whether they are deductible under Section 27 of the Companies Income Tax Act (Cap C21, LFN 2004) or whether they represent a disguised profit distribution.

A TP Disclosure is needed when a Nigerian company sells goods to a related foreign distributor at prices that differ from prices charged to independent customers. The FIRS may apply the Comparable Uncontrolled Price method to benchmark the transaction and disallow deductions or adjust revenues under Regulation 8 of the TP Regulations 2018.

A TP Disclosure is required when a Nigerian bank or financial institution enters into intra-group financial transactions — such as back-to-back loans, cash pooling arrangements, or guarantees — with connected entities, as the FIRS examines the interest rates and guarantee fees against the arm's length standard.

A TP Disclosure is needed when a company undergoes a business restructuring involving the transfer of functions, assets, or risks to a related party, which may trigger capital gains tax under the Capital Gains Tax Act (Cap C1, LFN 2004) and require arm's length valuation of the transferred items.

Parties in Nigeria should prepare a Transfer Pricing Disclosure (Nigeria) proactively rather than waiting for a dispute to arise. Courts interpret agreements based on the written terms rather than oral representations. Under Nigerian law, the Companies and Allied Matters Act 2020 (CAMA) regulates corporate entities through the Corporate Affairs Commission (CAC). The Labour Act (Cap L1 LFN 2004) and the National Industrial Court of Nigeria (NICN) govern employment disputes. The Nigeria Data Protection Regulation (NDPR) 2019 and the Nigeria Data Protection Commission (NDPC) protect personal data. The Federal Inland Revenue Service (FIRS) administers tax obligations under the Companies Income Tax Act. The Federal High Court and state High Courts have jurisdiction over civil matters. Where the transaction involves regulated activities, prior approval from the relevant authority may be required before execution.

A Nigeria Transfer Pricing Disclosure must contain the following essential elements to comply with the Income Tax (Transfer Pricing) Regulations 2018 and FIRS administrative requirements.

Taxpayer Identification: Full legal name of the disclosing company, Tax Identification Number (TIN) issued by the FIRS, Companies and Allied Matters Act 2020 (CAMA 2020) RC number, registered office address, and tax year to which the disclosure relates.

Connected Persons Identification: Full legal name, country of incorporation or residence, TIN or equivalent foreign tax identification number, and the nature of the connection (parent, subsidiary, associate, or other related party) for each counterparty to a disclosed controlled transaction, as required by Regulation 12 of the TP Regulations 2018.

Controlled Transaction Summary: A schedule of all controlled transactions in the tax year, categorised by type (sale of goods, provision of services, licensing of intangibles, financial transactions, or business restructurings), the currency of transaction, and the aggregate NGN value of each transaction type. Transactions denominated in foreign currency must be converted at the CBN exchange rate on the transaction date.

Transfer Pricing Method: The transfer pricing method selected for each transaction category — CUP, Resale Price, Cost Plus, TNMM, or Profit Split — with reasons for selection of the most appropriate method under Regulation 4 of the TP Regulations 2018 and the OECD Transfer Pricing Guidelines.

Benchmarking Analysis: A summary of the benchmarking analysis used to establish the arm's length range for each transaction type, including the source of comparable data (commercial databases such as Bureau van Dijk Orbis, FIRS-approved Nigerian comparables, or regional African comparables), the financial indicator tested, and the interquartile range.

Documentation Confirmation: A declaration that the taxpayer has prepared and maintains contemporaneous transfer pricing documentation — the Master File and Local File in accordance with OECD BEPS Action 13 — and that the documentation is available for production to the FIRS upon request under Regulation 15 of the TP Regulations 2018.

Authorised Signatory: Signature of a director or authorised officer of the company, with the officer's name, designation, and date of signing, confirming the accuracy and completeness of the disclosure.

Additional compliance elements for a Transfer Pricing Disclosure (Nigeria) used in Nigeria include: Under Nigerian law, the Companies and Allied Matters Act 2020 (CAMA) regulates corporate entities through the Corporate Affairs Commission (CAC). The Labour Act (Cap L1 LFN 2004) and the National Industrial Court of Nigeria (NICN) govern employment disputes. The Nigeria Data Protection Regulation (NDPR) 2019 and the Nigeria Data Protection Commission (NDPC) protect personal data. The Federal Inland Revenue Service (FIRS) administers tax obligations under the Companies Income Tax Act. The Federal High Court and state High Courts have jurisdiction over civil matters. Forms-legal.com provides this template as a starting point for Nigeria-compliant documentation.