On 21 February 2019, Nigeria’s Federal Inland Revenue Services (FIRS) has issued guidelines on Mutual Agreement Procedure (MAP). The guidelines prescribe information regarding eligibility for MAP, access to MAP, overview of the MAP request process, and the implementation of a MAP decision.
The purpose of these guidelines is to provide guidance on obtaining assistance from the Nigerian Competent Authority (CA) by persons that fall within the scope of a subsisting tax treaty between Nigeria and any other contracting state. This assistance is provided to taxpayers in order to resolve international tax disputes involving double taxation and inconsistencies in the interpretation or application of the provisions of a Tax Treaty.
These guidelines also provide additional guidance on the application for corresponding adjustments in the event of application of the Article dealing with associated enterprises. Furthermore, taxpayers may require assistance from the competent authority where there are disputes relating to:
Transfer pricing adjustments
A taxpayer resident in Nigeria or its related party (including a permanent establishment) in a treaty country may be subjected to additional tax by the tax authority of that Treaty Partner because of transfer pricing adjustment. The transfer pricing adjustment may be as a result of adjustment to the price of goods or services transferred to or from the related party (or permanent establishment), or adjustment to other inter-related party transactions such as cost  contribution arrangements, financial arrangements etc. In any of these transfer pricing adjustments, the Nigerian taxpayer may request that the Nigeria’s CA grant a corresponding adjustment to its taxable income in order to prevent economic double taxation.
Dual residence status
A Nigerian resident taxpayer may also be considered to be a resident of a Treaty Partner, under that country’s domestic law. This may create a situation of dual residency for the taxpayer. If the residence issue is not resolved, the taxpayer could be subject to tax on the same income in both countries. A MAP request would trigger discussions between the CAs regarding the proper application of the tie-breaker rules contained in the Article on Resident in the Tax Treaty.
Permanent establishment
Where a Nigerian resident taxpayer who is subject to tax in Nigeria on income, including income from carrying on a business in a Treaty country, is taxed by the tax authority of the Treaty Partner on the business income earned in that treaty country, despite not having a permanent establishment in that country under the Tax Treaty. The taxpayer may request the Nigerian CA to address the issue of taxation not in accordance with the Tax Treaty with the CA of the Treaty Partner.
Withholding tax
Where a withholding tax is levied beyond what is allowed within an applicable Tax Treaty by a Treaty Partner on a payment to a Nigerian resident. Such taxation will not be in accordance with the relevant tax treaty. Accordingly, the Nigerian resident taxpayer may request the Nigerian CA or the CA of the treaty partner, as may be allowable by the treaty, to resolve the issue of non-compliance with treaty provision.
Uncertainties relating to the classification of an item of income
Where there is uncertainty whether the Tax Treaty covers an item of income or where there is uncertainty of the characterization or classification of an item of income arising in the other jurisdiction, or lack of clear understanding of the import of a given treaty provision, a taxpayer may approach the Nigerian CA for clarification.
The time limit for presenting a case for CA’s assistance depends upon the specific terms as contained in the MAP article of the particular Tax Treaty under which the MAP is invoked. To this end, the relevant Tax Treaty should be consulted in every case. Where the time limit for presenting a case to invoke MAP is not specified in the relevant Tax Treaty, the CAs of the Contracting States will agree the applicable time limit.
Nonetheless, the case must be presented to the Nigerian CA within 3 years from the first notification of the action resulting in taxation not in accordance with the provisions of the Tax Convention.
Once a request has been accepted, the Nigerian CA would try to resolve the issue on its own. Where this is not possible, the Nigerian CA will notify the CA in the other country of its intention to commence the MAP. Â The taxpayer may withdraw the request for MAP at any time before an agreement has been reached between the CAs. Likewise, the Nigerian CA may terminate the MAP in certain circumstances.
