The Federal Inland Revenue Service (FIRS) in Nigeria has built a Transfer Pricing Division on November 2013 that is accountable for the execution and administration of the Income Tax Transfer Pricing Regulations No.1 2012 (TP Regulations). This regulations give an outline to settle whether related party transactions comply with arm’s length principles. The TP Division are requesting clarifications and documentation and alerting taxpayers of a TP audit. Taxpayers who have not yet received communications from FIRS should revise the TP documentation’s status. The following significant considerations for all taxpayers as the FIRS TP division starts review of TP documentation and returns under this first implementation cycle:

Taxpayers who have finished the TP compliance requirements must still confirm they are well prepared in the TP audit event under company-risk assessment and effective implementation of TP policies

• Are all intercompany transactions strongly documented in the TP Documentation file?
• Is supporting information sufficiently maintained e.g., intercompany agreements, invoices, evidence of benefits received under services transactions, etc.?
• Are specific transactions that may be top risk identified and is there sufficient support for these transactions?
• If documentation is in place, is the particular staff fully conscious of how TP policies should be implemented? Does the financial outcome follow the stated policy? If not, is there a satisfactory explanation?

Taxpayers who have not finished the TP compliance requirements should take action

• Is TP Documentation preparation reliable with the Nigerian TP Regulations and the OECD Guidelines on transfer pricing? FIRS can request this documentation with 21 days’ notice and may not be willing to grant an extension if requested by taxpayers based on the understanding that they have been provided sufficient time (18 months from the starting of a financial year) to make TP documentation.
• Have TP Declaration and TP Disclosure forms been submitted along with the tax return? Failure to do so will result in the tax return being deemed incomplete.
• Has a TP Policy document been submitted as requested by the FIRS? Failure to submit a satisfactory policy document with the tax return may result in classification as high risk by the FIRS.