Tax Alert – The Income Tax (Transfer Pricing) Regulations, No. 1, 2012

by Oserogho & Associates

1. Tax Alert – The Income Tax (Transfer Pricing) Regulations, No. 1, 2012

2. Disclaimer Notice

3. Copyright Notice

The Income Tax (Transfer Pricing) Regulations, No. 1, 2012


The proposed Income Tax (Transfer pricing) Regulations, 2012 (“TPRs”) is published by the Federal Inland Revenue Service (“FIRS”) in pursuance of the powers conferred on it by Section 61 of the Federal Inland Revenue Service (Establishment) Act. No.13 of 2007.

The proposed commencement date for the implementation of the Transfer Pricing Regulations is 1st January 2013.

Objectives of the Transfer Pricing Regulations, 2012

One of the primary objectives of the Transfer Pricing Regulations is the provision to the Nigerian tax authorities, tools to fight tax evasion, which is usually promoted through over or under–pricing of transactions between associated enterprises or corporations not adhering to the arm’s length tax principle.

Two other objectives of the Transfer Pricing Regulations are the reduction of the risks of economic double taxation; and the provision of a level playing field between associated companies on the one hand and independent un-associated companies doing business in Nigeria on the other hand.

Transfer Pricing – Arm Length and Artificial Taxable Transactions

Section 17 of the Personal Income Tax Act (as amended), Section 22 of the Companies’ Income Tax Act (as amended) and Section 15 of the Petroleum Profit Tax Act authorises FIRS to disregard and substitute a proper tax assessment for a prior tax assessment where any transaction is intended to artificially or fictitiously reduce the amount of the tax that will otherwise be assessed and paid by a tax payer in Nigeria.

A transaction will be deemed to be artificial or fictitious where one of the parties either has control over the other party, or the parties are so related that the terms of the transaction will be biased or more favourable as amongst the controlled or related parties; in contrast to where the parties are engaged in the same or similar transactions as independent parties, dealing at arm’s length basis.

A company that is affected by a decision of FIRS in the above regard has a right to appeal against such a FIRS decision in the first instance to a FIRS appointed Decision Review Panel, with a further right of appeal to the Federal High Court, the Court of Appeal and the Supreme Court which is the Court of last resort in Nigeria.

Permanent Establishments and Transfer Pricing Regulations, 2012

The proposed Nigerian Transfer Pricing Regulations, 2012 now formally provides that permanent establishments (“PE”) will be treated under these Regulations as separate tax entities, and any transaction between a permanent establishment and its parent company or head office, or between it and another connected taxable persons, shall be treated as a controlled transaction liable to the application of the provisions of the Transfer Pricing Regulations, 2012.

Compliance with Arm’s Length Principle, Documentations, Advance Pricing Agreements, etc.

Arm’s Length Principle: The arm’s length principle requires that the conditions of a transaction, between connected taxable persons, should not differ from the conditions that would have applied if the connected persons were independent contracting parties engaged in comparable similar transactions carried on under comparable similar circumstances.

Connected persons are therefore required by Article 4 of the Transfer Pricing Regulations to always ensure that all taxable profits that result from transactions between them are in compliance with the arm’s length principle. Where connected persons fail to abide with the arm’s length principle, the Federal Inland Revenue Service is authorised to make such necessary tax adjustments that will bring the transaction within the parameters of the arm’s length principle.

Transfer Pricing and Comparability Factors

Barring repetition, Article 9 of the proposed Transfer Pricing Regulations, 2012 provides that for the purpose of determining whether the pricing and other conditions of a controlled transaction are consistent with the arm’s length principle, the tax payer shall, in the first instance, ensure that the transaction is comparable with a similar or identical transaction between two independent persons carrying on business under comparable conditions.

Transfer Pricing Methods

Some of the Transfer Pricing Methods that can be applied in determining whether a transaction is transacted within the parameters of the Arm’s Length Principle include (i) the Comparable Uncontrolled Price (“CUP”) method, or (ii) the Resale Price Method, or (iii) the Cost Plus Method, or (iv) the Transactional Net Margin Method, or (v) the Transactional Profit Split Method, or (vi) any other method as may be prescribed by FIRS, from time to time.

The Cost Plus Method is described by the proposed Transfer Pricing Regulations to mean the method in which the mark-up on the costs direct

LOADING PDF: If there are any problems, click here to download the file.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Oserogho & Associates | Attorney Advertising

Written by:

Oserogho & Associates

Oserogho & Associates on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
Privacy Policy (Updated: October 8, 2015):

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.


JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at:

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.