A review of Nigeria's present fiscal and currency control regimes as they relate to commercial and industrial IP rights become imperative in order to give impetus to government's efforts towards reviving and diversifying the country ...

Prior to the introduction of the Income Tax (Transfer pricing) Regulations on 2 August, 2012 ("TP Regulations") the National Office for Technology Acquisition and Promotion (NOTAP) had specific guidelines for recognizing technology transfer agreements between foreign licensors and Nigerian licensees.

NOTAP also has approved range of fees/royalties Nigerian licensees were permitted to pay the foreign owners and licensors for use of the licensed commercial and industrial intangible property rights (IP rights).. Also, the Central Bank of Nigeria ("CBN") in its yearly Monetary, Credit, Foreign Trade and Exchange Policy Guidelines prescribed range of fees/royalties for which CBN was prepared to sell foreign exchange to the Nigerian companies at official government rates, for use in making the foreign payments.

It could therefore be argued that prior to 2 August 2012, there was no clearly defined parameters that Nigerian taxpayers were mandated to use in empirically valuing licensed IP rights and determining the rate of fees payable to foreign IP owners and licensors. The NOTAP and CBN guidelines were seen as only being focused on imposing foreign currency control and restrictions on sourcing of foreign exchange from the government. Hence, companies were not precluded from recourse to autonomous or private sources in meeting their foreign exchange needs.

The introduction of the TP Regulations has now filled this loophole as it requires taxpayers to adopt the Arm's Length Standard in determining the prices of related party transactions. The practical implication of this in relation to IP rights is that taxpayers will now be called upon to adduce proof of the valuation methods used and analysis performed in determining royalty rates, fees and commissions being paid for licensed IP rights.

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