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Nigeria – Transfer Pricing (2025)

Nigeria’s transfer pricing framework is anchored in the Companies Income Tax Act, Section 22 (2) (b) and the Income Tax (Transfer Pricing) Regulations, 2018 (the “TP Regulations”). The domestic rules require application consistent with the OECD Transfer Pricing Guidelines, but include a supremacy clause: under Part V, Regulations 18 & 19 of the TP Regulations, where any inconsistency exists between applicable laws, rules, regulations, or the OECD documents referred to in Regulation 18, the provisions of the relevant tax laws shall prevail. This places the TP Regulations at the core of transfer pricing enforcement in Nigeria while recognizing the OCDE Guidelines as interpretative guidance subject to national law.

Part III, Regulation 12 of the TP Regulations provides the definition of “connected person” and cross-refers to the Seventh Schedule, Paragraph 6 (a) of the Companies Income Tax Act. Generally, persons are deemed connected where one person has the ability to control or influence the other in making financial, commercial, or operational decisions, or where a third person can control or influence both. The Regulations specify that “connected person” includes persons related, associated, or connected under the Companies Income Tax Act CAP. C21, the Petroleum Profit Tax Act CAP. P13, the Personal Income Tax Act CAP. P8, and the Capital Gains Tax Act CAP. C1, and also refers to “associated enterprise” as in the OECD Guidelines. The Seventh Schedule further clarifies that a “connected person” means any person controlled by or under common control, ownership or management; any person not connected but receiving an implicit or explicit guarantee or deposit for corresponding debts; or any related party described under the Nigerian Transfer Pricing Regulation 2018.

Arm’s Length Principle and the role of the OECD Guidelines

Nigerian law explicitly references the arm’s length principle and requires transfer pricing application consistent with the OECD Transfer Pricing Guidelines. Nonetheless, Part V, Regulations 18 & 19 of the TP Regulations make clear that in case of inconsistency between domestic provisions and OECD documents, the domestic tax law provisions prevail. Therefore, the OECD Guidelines function as the primary interpretative reference but are subordinate in the event of conflict with Nigerian law.

Transfer pricing methods and selection criteria

Part II, Regulation 5 (1) and (4) of the TP Regulations expressly lists the accepted methods: Comparable Uncontrolled Price (CUP), Resale Price, Cost Plus, Transactional Net Margin Method (TNMM), and Profit Split. The Regulations allow taxpayers to adopt a method other than those listed when they can satisfy the Service that none of the listed methods can be reasonably applied, that the chosen method yields results consistent with those between independent parties in comparable circumstances, and that reliable information exists to apply the chosen method (Part II, Regulation 5 (4)).

Regarding the criterion for method application, Nigeria follows a “most appropriate method” approach rather than a rigid hierarchy. Part II, Regulation 5 (2) stipulates that “In each case, the most appropriate transfer pricing method shall be used taking into account the respective strengths and weaknesses of the transfer pricing method…, the nature of the controlled transaction determined, in particular, through an analysis of the functions performed, assets employed and risks assumed…, availability of reliable information needed to apply the transfer pricing method; and degree of comparability…”. Thus, the analysis of functions, assets and risks, data availability, and the feasibility and reliability of comparability adjustments determine method selection.

Comparability analysis and arm’s length ranges

Nigeria adheres to the OECD Chapter III guidance on comparability. Part III, Regulation 11 (3) & (4) state that an uncontrolled transaction is comparable to a controlled transaction where no significant differences exist that could materially affect the conditions, or where reasonably accurate adjustments can be made to eliminate or reduce the effects of such differences. The Regulations list the economically relevant comparability factors to be considered: characteristics of goods, property or services; functions performed including assets used and risks assumed; contractual terms; economic circumstances; and business strategies pursued (Part III, Regulation 11 (4)).

The jurisdiction does not prefer domestic comparables over foreign ones and the tax administration does not use secret comparables. For determining arm’s length remuneration when multiple financial indicators arise and comparability is uncertain, Part II, Regulation 5 (6) requires the use of a statistical approach and specifies that the interquartile range shall be considered an arm’s length range.

Comparability adjustments are mandated where differences exist that can be addressed by reasonably accurate adjustments to eliminate or reduce material differences, as set out in Part III, Regulation 11 (3)(b).

Documentation and reporting obligations

Nigeria mandates transfer pricing documentation consistent with the three-tiered OECD approach: Master File, Local File and Country-by-Country Report under Part IV, Regulations 13, 14, 15, 16, 17 and the Schedule to Regulation 17 of the TP Regulations 2018. Specific reporting requirements include a Transfer Pricing Declaration concerning relationships with connected persons and a Transfer Pricing Disclosure of controlled transactions.

Deadlines and practical requirements are detailed in the Regulations. The Transfer Pricing Declaration must be submitted to the Federal Inland Revenue Service (FIRS) not later than eighteen months after incorporation or within six months after the end of the accounting year, whichever is earlier; updates must be filed within six months of the end of the accounting year in which the event occurred (Part IV, Regulations 13 (3) & (5)). The Transfer Pricing Disclosure must be made to FIRS without notice or demand not later than six months after the end of each accounting year or eighteen months after incorporation, whichever is earlier (Part IV, Regulations 14 (10) & (3), 15, 16 (1) (4) & (5), 17 (1) & (3) and 24).

TP documentation must be in place prior to the tax return filing deadline for the year in which the transactions occurred (contemporaneous documentation) and should be made available to the Service within 21 days of a written request. However, a connected person with total controlled transactions below three hundred million naira may opt not to maintain contemporaneous documentation; in such cases the FIRS may still require preparation and submission of relevant documentation within 90 days of receiving notice (Part IV, Regulation 17 (3)). The Country-by-Country Report is to be filed no later than 12 months after the last day of the reporting accounting year of the MNE Group (Part III, Regulation 9 and 14 of the Income Tax (Country-By-Country Reporting) Regulations, 2018). The official language for documentation is English; when a document is not in English, the Service may require, at the taxpayer’s expense, a translation certified by a sworn translator or another person approved by the Service.

Penalties for documentation and reporting failures

The TP Regulations set out administrative penalties for failures to declare, disclose or document transfer pricing information. Failure to submit the TP Declaration results in a penalty of twenty-five thousand naira for each day the failure continues (Part IV, Regulation 13 (7)). Failure to make the required TP Disclosure within the specified period triggers an administrative penalty of ten million naira or one percent of the value of the controlled transaction not disclosed, whichever is higher, plus ten thousand naira for each day the failure continues. Incorrect disclosure of transactions is penalised with ten million naira or one percent of the value of the incorrectly disclosed controlled transactions, whichever is higher.

Failure to submit TP documentation within 21 days of a Service request attracts an administrative penalty equal to ten million naira or one percent of the total value of all controlled transactions, whichever is higher, and ten thousand naira for each day the failure continues. Extensions do not prevent penalties if the extended deadline is missed. For CbC reporting, late filing results in a penalty of N 10,000,000 initially and N 1,000,000 for each month of continued default; filing an incorrect or false CbC Report attracts a penalty of N 10,000,000. Failure to provide notification on whether a constituent entity is the Ultimate Parent Entity or Surrogate Parent Entity results in an administrative penalty of N 5,000,000 initially and N 10,000 for each day in default (Part IV, Regulations 11, 12 and 13 of the Income Tax (Country-By-Country Reporting) Regulations, 2018).

Exemptions and simplification measures

A notable simplification is the documentation threshold: a connected person whose total value of controlled transactions is less than three hundred million naira may choose not to maintain contemporaneous documentation, though FIRS may still demand documentation within 90 days (Part IV, Regulation 17 (3)). Regarding safe harbours, Part VII, Regulation 22 provides that a connected person may be exempted from Regulation 16 where controlled transactions are priced in accordance with specific guidelines published by the Service. However, the Service has not published such guidelines and specific safe harbour rules are currently under development.

Advance Pricing Agreements (APAs) and dispute resolution

The TP Regulations permit the FIRS to enter into Advance Pricing Agreements, including unilateral, bilateral and multilateral APAs, either alone or together with competent authorities of other jurisdictions, subject to publication of implementation guidelines (Part II, Regulation 9). An APA entered with FIRS will apply for a period not exceeding three years. Nigeria has not entered into any APAs to date because the Service has yet to publish its APA guidelines. The Regulations set out the composition and administration of the Dispute Review Panel in Regulation 21. Nigeria has issued MAP Guidelines which provide rules, guidelines and procedures on how taxpayers can access and use Mutual Agreement Procedures.

Year‑end adjustments and secondary adjustments

The Companies Income Tax Act permits year‑end adjustments. Section 55(2)(b) and 90 allow a company to make necessary adjustments in its accounts before filing returns, with the due date for filing being six months after accounting year‑end. If a return has already been filed, the law allows corrections or adjustments within six years of filing. According to the country profile, Nigeria does not make secondary adjustments.

Attribution of profits to permanent establishments

Nigeria does not follow the Authorised OECD Approaches (AOA) for attributing profits to permanent establishments. Instead, Nigeria adopts Article 7 of the UN Model Tax Convention in all its bilateral tax treaties.

Other legislative and administrative considerations

Other domestic provisions relevant to transfer pricing include Section 17 of the Personal Income Tax Act CAP. P8; Section 15 of the Petroleum Profits Tax Act CAP. P13 (as amended by the Petroleum Profits Tax (Amendment) Act, 2007); Section 20 of the Capital Gains Tax Act CAP. C1; and Section 78 of the Companies Income Tax Act CAP. C21 dealing with withholding obligations on payments such as interest and royalties. While the TP Regulations do not provide specific guidance on financial transactions, the Finance Act 2019 introduced interest deductibility rules into the Companies Income Tax Act consistent with BEPS Action 4, limiting interest deductions to 30% of EBITDA for connected‑party situations, as set out in the Seventh Schedule ‘Deductible Interest’ (Section 23 of the Finance Act 2019) and Section 78 of CITA.

Conclusion

Nigeria’s transfer pricing regime is comprehensive and grounded in the Income Tax (Transfer Pricing) Regulations, 2018, which incorporate the OECD Guidelines as interpretative guidance while preserving the primacy of domestic tax law in case of conflict. The jurisdiction adopts the “most appropriate method” standard, recognizes all main transfer pricing methods, requires contemporaneous documentation aligned with Master File, Local File and CbC reporting, and enforces detailed penalties for non‑compliance. Administrative tools for dispute prevention and resolution, including APAs and MAP, are in place though APA implementation awaits publication of national guidelines. Simplification measures exist for low‑value transaction portfolios and safe harbour frameworks remain under development.

References

For general access to country transfer pricing profiles, see https://www.oecd.org/en/topics/sub-issues/transfer-pricing/transfer-pricing-country-profiles.html

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