The Federal Inland Revenue Service (FIRS) has issued a Public Notice that provides additional information on its recently published Income Tax Transfer Pricing (TP) Regulations 2018.
In addition, the agency issued also an Information Circular No: 2018/03 (the Circular) with specific guidelines on TP documentation requirements in Nigeria to guide all relevant stakeholders in their TP tax computations and filings.
Specifically, the Public Notice indicates that the commencement date of the TP Regulations is 12 March 2018 but the Service offers to grant taxpayers a grace period up to 31 December 2018 to enable them to fulfil all outstanding TP obligations such as filing of TP returns and submission of TP documentation etc.
However, the FIRS maintained that it shall commence full imposition of the administrative penalties contained in the TP Regulations in the event of failure to regularize these obligations at the expiry of the grace period.
According to the agency, the circular on Guidelines on TP documentation addresses sundry issues relating to the form and content of TP documentation.
Some of the specific guidelines in the Circular include, that taxpayers are required to adopt a three-tiered structure for TP documentation and it also provides detailed guidance on the expected content of each of these documents; and taxpayers whose total value of controlled transactions are less than N300million are to furnish the FIRS with their Master Files and Local Files within 90 days of receiving the FIRS’ request to submit their TP documentation.
Others are, the Service may grant valid requests for extension of time to comply with a notice but this is subject to specified conditions under which such extensions may be granted which would include: death or serious illness of a key personnel, fire or natural disaster, civil unrest, public holiday occurring during the period of notice and any other genuine incident preventing the company from complying with the notice;
Also, the guidelines in require taxpayers to review and update their TP documentation yearly to ascertain that the facts and circumstances contained therein are still valid.
The FIRS does not expect taxpayers to prepare TP documentation where the total value of controlled transactions is less than N300 million; where the related party transactions are covered by an Advance Pricing Agreement (APA), provided that the taxpayers keep to the terms of the APA; and where the related party transactions are priced in accordance with the requirement of Nigerian statutory provisions.
By implication, the issuance of the PN and the Circular indicates the tax agency’s readiness to fully implement the provisions of the TP Regulations.
In order to escape from the huge administrative penalties and increased compliance requirements non-compliance with the guidelines may attract, experts have charged taxpayers to ensure fulfillment of all outstanding TP compliance obligations on or before 31 December 2018 and ensure compliance with the new TP Regulations.
