In the last few years, there have been significant developments in the Nigerian Transfer Pricing (TP) space. The Andersen Tax Digest of 29 January 2019 reviewed the significant developments that occurred in 2018, the potential impact for taxpayers and put forward an outlook for the Nigerian TP space in 2019 (the Outlook).

This article reviews the impact of these developments/changes during 2019, other developments within the TP space and the potential implications for taxpayers in 2020.

Overview of TP Developments in 2018

As mentioned in the Outlook, the end of 2018 saw an unprecedented flurry of activities in the TP space due to the introduction of the following TP related Regulations by the Federal Inland Revenue Service (FIRS):

  1. The Income Tax (Transfer Pricing) Regulations, 2018 (the Revised TP Regulations): The Regulations introduced significant changes to the Income Tax (Transfer Pricing) Regulations, 2012 (the 2012 TP Regulations) including a specific TP penalty regime in Nigeria.

    Further to the release of the Revised TP Regulations, the FIRS issued a public notice which granted taxpayers till December 31, 2018 to fulfill all pending TP compliance obligations including filing of outstanding TP returns and submission of TP documentation requested by the FIRS.
  2. The Income Tax ( Country-by-Country Reporting) Regulations, 2018 (CbCR Regulations): These Regulations required Multinational Enterprises (MNEs) headquartered in Nigeria with a consolidated group revenue of ₦160 billion or more to prepare a Country by Country (CbC) report which must be submitted not later than 12 months after the last day of the MNEs' accounting year end. Constituent entities of the MNEs resident in Nigeria are required to notify the FIRS of the entity within the Group responsible for preparing and filing the CbC report before the end of any financial year. Penalties for non-compliance are also stipulated in the Regulations.

Review of the 2019 TP Space

Due to the introduction of the above Regulations, we observed the following activities in 2019:

1. Imposition of Penalties for Non- Compliance

During the year, the FIRS commenced the issuance of letters imposing penalties on:

a. Taxpayers that failed to file all outstanding TP returns or submit TP documentation by the end of the grace period, i.e. 31 December 2018. The penalties imposed were based on the Revised TP Regulations.

However, several taxpayers have contested the imposition of penalties for prior years based on the Revised TP Regulations. One of the arguments against the imposition of such penalties is based on the commencement date of the Revised TP Regulations. The Revised TP Regulations states the commencement date as the basis period commencing after March 2018. Thus, TP filings for basis periods prior to the commencement date should not be subject to the provisions of the Revised TP Regulations.

It should be noted that none of the cases of imposition of penalties have been decided by the Nigerian courts. We understand that some taxpayers are considering other dispute resolution options including approaching the newly reformed Tax Appeal Tribunal (TAT) to resolve this issue.

b. Taxpayers who failed to file the CbC report notification forms where their Groups are not exempted MNEs.

Also, several taxpayers considered members of exempted MNEs were required to demonstrate that their Groups were exempted from the provisions of the CbCR Regulations. The FIRS requested for the consolidated financial statements to evidence the exemption status of the Groups.

However, for MNE Groups that are not statutorily required to prepare financial statements, other information such as individual financial statements of each entity within the Group, independent auditors' statements certifying the Group's revenue etc. had to be provided as evidence to support their exemption status.

It is clear that the compliance burden of MNEs increased significantly in 2019 because of these new Regulations.

2. TP Audits and Investigation

Contrary to expectations going into the year, the FIRS seemed to slow down on TP audits and investigations in 2019. Several TP audits, which commenced in 2018, are yet to be concluded as at the date of this article. This could be due to the FIRS reviewing the large amount of information provided towards the end of 2018 and dealing with the new TP penalty regime.

3. First Filing of CbC Report

For most MNEs that have CbC report filing obligations or elected to file their CbC report in Nigeria, December 2019 will be their first filing deadline.

However, unlike other jurisdictions where the CbCR Regulations have been implemented, the FIRS has yet to introduce an e-filing platform for the submission of the first CbC report in Nigeria. Thus, taxpayers with filing obligations may be required to file the report manually at least for discharging the 2019 obligation.

Other Developments in 2019

The following developments occurred during the year:

  1. Introduction of the Income Tax (Common Reporting Standard) Regulations (the CRS Regulations): This is not a TP related Regulations, but an outcome of the OECD-led Base Erosion and Profit Shifting (BEPS) project. The Regulations which became effective from 1 July 2019, provide guidelines on how Reporting Financial Institutions (RFIs) - which include depository institutions, investment entities, custodial institutions and specified insurance companies – should carry out due diligence procedures to identify Reportable Accounts (RAs), outline compliance obligations for RAs, state the method of compliance and the penalties for non-compliance. Any failure by an RFI to file information returns will attract a penalty of ₦10million in the first instance plus ₦1million for every month the failure continues.
  2. Proposed Introduction of an E-filing Platform for TP returns: In 2017, the FIRS introduced several electronic services, one of which was an e-filing system that enables taxpayers file their tax returns on the FIRS' Integrated Tax Administration System (ITAS). This system however did not include a process for filing TP returns. In order to regularize this, the FIRS has made known plans to deploy an e-filing platform for TP returns. The platform, when deployed, will enable the electronic filing of;
    1. TP declaration forms
    2. TP disclosure forms
    3. CbCR notification
    4. CbC reports
  3. In addition, taxpayers will be able to upload other relevant attachments including financial statements, tax computations, acknowledged filed tax returns etc.

Potential Implications for Taxpayers in 2020

  1. Increased Information for FIRS' Risk Assessment: The FIRS will have an unprecedented amount of information about taxpayers from their TP filings, CbC reports and CRS filings. This should result in more in-depth risk assessments procedures to identify taxpayers for audit. As such, taxpayers are advised to review their related party transactions and tax planning strategies to ensure they do not create significant TP risks for the Group.
  2. Increased TP Audits and Investigations: It is expected that the FIRS will significantly increase the rate of audit of taxpayers' records and close out on outstanding audits.

    As a result, there may be increase in TP disputes in 2020 particularly due to controversial clauses within the Regulations, which are considered to be contrary to the arm's length principle.
  3. Increased Compliance Cost for RFIs: With the introduction of the CRS Regulations, RFIs are faced with further compliance obligations aside from the requirements under the TP Regulations and CbCR Regulations. This will lead to significant increase in the cost of compliance including training their employees and updating Information Technology systems etc.
  4. Ease of Filing for Taxpayers: With the proposed introduction of the e-filing platform, filing of relevant returns may be less cumbersome for taxpayers.
  5. Imposition of Penalties: The FIRS will continue to impose penalties on defaulting taxpayers that fail to comply with the provisions of any of the Regulations. Thus, taxpayers must ensure they meet all relevant compliance obligations to avoid these penalties.


There is a clear drive to improve the level of compliance by taxpayers and increase the amount of information available to the FIRS to carry out their duties. In view of this, it is paramount that taxpayers take proactive measures to ensure full compliance with the relevant Regulations. Lastly, taxpayers should also keep abreast of changes in the TP space and proactively review their related party transactions and tax planning strategies to ensure that all risks are managed or mitigated.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.