The Federal Inland Revenue Service (FIRS) has incorporated into its tax audit procedures certain of the recommendations included in the OECD’s base erosion and profit shifting (BEPS) project. For instance, the tax authority is scrutinizing transactions between Nigerian subsidiaries and their foreign related parties, especially those related parties located in tax friendly jurisdictions. The aim is to determine that these entities actually provide the services as contracted. Other progresses in Nigeria that reflects the BEPS proposals include:
- Though CFC rule is not incorporated in Nigeria but this rule is expected to be implemented soon.
- The FIRS is currently investigating whether certain arrangements reflect a mismatch when a taxpayer’s deduction for a payment is not counted in the taxable income of the counterparty to the transaction.
- Nigeria may introduce thin capitalization rule sooner than expected.
- The Nigerian tax authority has started a review of companies’ transfer pricing policies and compliance documentation, and it is anticipated that the BEPS recommendations.
- Tax authority has started to request that multinational entities in Nigeria to submit country-by-country reports, and this has been incorporated into the audit process.
