The
Federal Inland Revenue Service has filed in the gazette a new
regulation, titled Income Tax (transfer pricing) Regulations to ensure
that Nigeria is able to tax businesses on an appropriate basis
corresponding to the economic activities carried out in the country.
According to a statement made available
to our correspondent on Monday, the regulations, which commenced on
August 2, 2012, are applicable after the date.
It said, “A company with an accounting
year end date of December 31 will be required to have its TP
documentation in place for the accounting year commencing January 1,
2013 rather than 2012. This was designed to allow taxpayers some
reasonable transition time.”
The rules, according to the statement,
cover all transactions between “connected taxable persons” which is
broadly defined to include individuals, permanent establishments created
by head offices, subsidiaries, associates, partnerships, joint ventures
and trusts.
Specifically, the rules will apply to
sale and purchase of goods, lease or sale of tangible assets, licensing,
transfer or use of intangible assets, provision of services, lending or
borrowing of money, manufacturing arrangements and any transaction,
which might affect profit and loss or any other incidental matter.
It said, “Every taxable person that will
be affected must prepare documentation to demonstrate the arm’s length
nature of their related party transactions.
“The documentation will usually include
information on the group’s structure and business activities of the
related parties, details of the related party transactions; the pricing
method adopted; the reasons for selecting the method; and information on
comparable transactions between unrelated parties.”
The Head of Tax and Corporate Advisory
at PwC, Mr. Taiwo Oyedele, said, “In the recent past, the FIRS has been
involved in capacity building with support from major international
organisations such as the International Monetary Fund in order to ensure
that the FIRS officers are able to effectively enforce compliance with
the TP Regulations. It is, therefore, important that taxpayers begin to
immediately review their related party transactions and consider ways to
comply effectively with the new rules while managing any potential
exposures alongside.”
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