Revised Transfer Pricing (TP) Regulation
We would like to draw your attention to the Revised Income Tax Transfer pricing Regulations 2018 recently released by the Federal Inland Revenue Service (FIRS). The new regulation has repealed the Income Tax (Transfer Pricing) Regulation No. 1 of 2012 and has an effective date of 12 March, 2018.
The Revised Regulation requires that:
- The tax paper fills an Update Transfer Pricing Declaration Form in any of the following circumstance:
- where there is a merger of the taxpayer or its parent company;
- where there is an acquisition of up to 20% of the taxpayer or its parent company by
previously unrelated entity;
- where there is any other change in the structure or arrangement of the taxpayer; and
- where there is an appointment or retirement of a director of a connected person.
- The TP disclosure form is also to be completed annually.
- The TP documentation should now involve connected persons preparing a master file, local
file and have a detailed list of information and analysis.
- Unlike the 2012 Regulations, the Revised Transfer Pricing Regulations has introduced
penalties for TP related offences. Please find below highlights of the offences and penalties.
TP Offense Penalty
i. Failure to file TP declaration N10 million in the first instance and N10,000 for
within the specified period of every day the failure continues.
months after financial year end
ii. Failure to file updated TP N25,000 for each day in which failure continues.
changes in directors.
iii. Failure to file TP disclosures The higher of N10 million or 1% of the value of the
within the specific period. controlled transactions not disclosed, and N10,000
every day the failure continues.
- Incorrect disclosure of The higher of N10 million or 1% of the value of the
transaction controlled transaction incorrectly disclosed.
v Failure to file TP The higher of N10 million or 1% of the value of the
documentation upon request. controlled transaction not disclosed and N10,000
every day the failure continues.
vi Failure to furnish information 1% of the value of each controlled transaction for
or document within the which the information or documentation was
specified period required and N10,000 every day the failure continues.
- Implications of the new regulation
The revised Transfer Pricing Regulations come with stiffer TP regime in Nigeria with the introduction of penalties. In the light of these revisions, there is need for taxpayers to brace up for the new challenges that come with the revision. We therefore encourage you to take the following steps:
- Review your related party transactions to ensure full compliance with the arm’s length
principle and documentation requirement;
- Have your company’s transfer pricing documentation in place;
- Put in place machinery to ensure all TP filings (TP declaration and disclosure) are done
annually and on time.
- Ensure that your financial statements are audited on time as a copy of the audited
financial statements is required to be filed along with the Transfer Pricing returns. A TP returns not filed within 6 months after the accounting year end will attract penalty of N10 million in the first instance and N10,000 for every day the failure continues.
For further enquiry on the revised TP regulation. Please contact our
Tax Partner: Mr. Mark Ariemuduigho
Mobile Phone: +234 802 310 6422
Senior Manager Tax: Mrs. Oyinkansola Fuwape
Mobile Phone: +234 802 312 4267