Foreward
In 2021, the Nigerian transfer pricing (TP) space witnessed significant changes which are expected to have far-reaching effects on tax compliance for both local and multinational enterprises. These changes include the strict implementation of the electronic filing system, issuance of guidelines for shared service arrangements among banks and other financial institutions by the Central Bank of Nigeria (CBN), among others. At the same time, taxpayers are still experiencing the lingering economic effect of the coronavirus pandemic which poses a peculiar threat to the application of the arm's length principle.
In light of the foregoing, taxpayers must stay updated on the TP requirements in order to achieve full compliance and avoid the stiff administrative penalties that come with non-compliance.
This TP survey was conducted in 2021 to determine how taxpayers are dealing with the lingering impact that COVID-19 has had on their businesses, assess their awareness of TP compliance requirements and TP risk assessment, and gauge their TP audit experience. We are pleased to present the findings from the fifth edition of our survey, which had 71 respondents representing the major industry sectors.
Based on the feedback provided, we observed a consistent level of TP compliance with the relevant regulations by the respondents as in the previous years, in addition to significant adoption of the electronic filing platform. Also, in respect of the Income Tax (Country-by-Country Reporting) Regulations, there is a high level of awareness and compliance as taxpayers in Nigeria are quickly embracing the changes in the ever-evolving TP landscape.
Generally, the high level of awareness and compliance may be a result of the stringent administrative penalties imposed on defaulting taxpayers. We also noted that most taxpayers have put measures in place to deal with the effects of COVID-19. Revenue remains the most impacted aspect of their business operations, while cashflow is now the least affected.
Interestingly, a significant number of the respondents had neither ongoing nor completed TP audits. There has, however, been a significant increase in the number of audits which have been concluded compared to prior years as more of the respondents are in the reconciliation/dispute resolution stage. This is because the Federal Inland Revenue Service (FIRS) has a mandate to shorten the TP audit cycle, with emphasis on closing out audits that have spanned more than 2 years in a matter of weeks.
The opinion expressed in this article is solely personal and does not represent the views of any organization or association to which the authors belong.
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