The regulations introduced related documentation requirements consisting of a disclosure requirement, a related party declaration form, and Master and Local files. The Country-by-Country reporting requirement under BEPS Action 13 has also been implemented under Nigerian law.

Disclosure Requirements

Taxpayers in Nigeria are required to submit a transfer pricing declaration form and a transfer pricing disclosure form generally along with their annual tax return (the law requires the filing of both forms within 18 months of incorporation or 6 months of the end of the reporting fiscal year, whichever earlier).

The declaration form contains details of all connected persons, and the disclosure form contains details of the related party transactions. Updated declaration forms are required to be submitted when a change occurs in the structure or circumstances of a person that would affect whether or not that person is connected with another.

Deadline extensions for the filing of the declaration and/or disclosure forms may be granted upon request at the discretion of the tax authorities.

Standard Documentation

Taxpayers are required to prepare and maintain a Master and Local file substantiating the arm’s length character of their related-party dealings.

Master File

The Master file must include a detailed description of the group's organizational and legal ownership structure, the location of the operating entities, any service level arrangements between group members, turnover, the sources of business profit, financing arrangements, intangibles owned, and policies regarding the management of intangibles from research to transfer, annual consolidated financial statements, tax positions, and any tax rulings or similar profit allocation arrangements by jurisdiction.

Local File

The local file must include detailed information relating to the dealings and transactions between the Nigerian entity and related enterprises, including functional analysis, a value-chain analysis, and a comparability analysis of the transactions.

The Master and Local files must be prepared by the corporate tax return due date for the year during which the transactions covered by the files took place. They need not be filed with the tax authorities but must be submitted within 21 days from the date of a written order by the tax authorities.

Under a materiality exception, taxpayers whose related party transactions for the year do not exceed NGN 300 million are exempted from preparing and maintaining contemporaneous transfer pricing documentation. Nevertheless, documentation must still be prepared and submitted within 90 days if requested by the tax authorities.

Country-by-Country (CbC) Report

Nigeria has issued CbC Reporting regulations in line with BEPS Action 13 guidelines and has also signed the Multilateral Competent Authority Agreement (MCAA) for the automatic exchange of CbC reports. The CbC reporting requirements apply for fiscal years beginning on or after 1 January 2018; however, voluntary filing is available from the fiscal year 2016.

The CbC reporting requirement applies primarily to resident parent companies of groups meeting an NGN 160 billion consolidated group revenue threshold in the previous year. It is shifted to non-parent constituent entities resident in Nigeria if:

The ultimate parent entity is not required to file a CbC report in its jurisdiction of tax residence;
The parent's jurisdiction has an international agreement for the exchange of information with Nigeria but does not have a competent authority agreement for the exchange of CbC reports by the filing deadline; or
There has been a systemic failure for exchange, and the non-parent constituent entity has been informed.

The obligation is not shifted to a local constituent entity (i.e., there is no local filing obligation) if a surrogate parent entity has been designated to file and certain conditions are met, including that the report will be exchanged with Nigeria and notification has been provided. Where there is a local filing obligation and more than one constituent entity, one may be designated to fulfill the obligation on behalf of all.

Further, a CbC notification must be provided to the tax authorities by the end of the reporting accounting year, including whether an entity is an ultimate or surrogate parent, and if neither, details of the identity and tax residence of the reporting entity.

The deadline for the CbC report is 12 months after the end of the reporting accounting year.

In May 2021, the Nigerian tax authorities announced the suspension of the local filing obligation of CbC reports by Nigerian non-parent constituent entities. The suspension did not apply to Nigerian ultimate parent entities or surrogate parent entities. Further, all entities -whether parent, surrogate or non-parent constituent entities- were still required to comply with other CbC requirements including in particular the notification obligation

The suspension has been removed effective 1 January 2022, and all non-parent constituent entities of multinational enterprises are henceforth required to comply with the local filing obligation of the CbC report.

Language of Documentation

The CbC report must be filed in English.

Penalties

Failing to comply with the CbC reporting requirements will result in the following penalties:

Late filing of CbC report – NGN 10 million plus NGN 1 million per month of delay;
Filing of an incorrect or false CbC report – NGN 10 million; and
Failure to provide notification - NGN 5 million plus NGN 10,000 per day of delay.

Other transfer pricing penalties include:

Failure to file updated transfer pricing declarations - NGN 25,000 per day of delay;
Failure to file transfer pricing disclosures - The higher of NGN 10 million or 1% of the value of the undisclosed controlled transaction(s) plus NGN 10,000 per day of delay;
Incorrect disclosure of transactions - The higher of NGN 10 million or 1% of the value of the incorrectly disclosed controlled transaction(s);
Failure to submit transfer pricing documentation upon request - The higher of NGN 10 million or 1% of the value of all controlled transactions plus NGN 10,000 per day of delay; and
Failure to furnish other information or documentation upon request - 1% of the value of the respective controlled transaction(s), plus NGN 10,000 per day of delay.

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