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Nigeria: New Transfer Pricing Regulations Adopted

(Nov. 23, 2012) Nigeria announced new Transfer Pricing Regulations on October 22, 2012, applicable retroactively to August 2, 2012. (Catherine Mutava, Nigeria: New Transfer Pricing Regulations Introduced, TAX NEWS SERVICE (Nov. 14, 2012), International Bureau of Fiscal Documentation online subscription database.) According to the Tax Justice Network, transfer pricing is established when “two related companies – that is, a parent company and a subsidiary, or two subsidiaries controlled by a common parent – trade with each other … .” (Transfer Pricing, Tax Justice Network website (last visited Nov. 19, 2012).) Nigeria considers that transfer pricing occurs between two enterprises if one business participates directly or indirectly in the management, control, or capital of the other business or if the same people directly or indirectly manage the two businesses. (Mutava, supra.)

Nigeria’s new regulations stress that all transactions between connected entities must be “at arm’s length,” that is, as if the two companies were not related. (Id.) The regulations cover various types of transactions, including:

  • sale and purchase of goods and services;
  • sale, purchase, or lease of tangible assets;
  • provision of services;
  • lending and borrowing of money;
  • manufacturing arrangements, and
  • all transactions that have an impact on profits and losses. (Id.)

The regulations do not apply if the transactions are priced as regulated by Nigerian laws or if the prices have been approved by a Nigerian government regulatory agency or other authority. (Id.)

Taxpayers may make agreements with the country’s Federal Inland Revenue Service in advance as to which of several approved methods they will use for establishing that transfer pricing is being done at arm’s length. The taxpayers are required to document transfer pricing and file a form on those prices with their annual tax returns. (Id.)