Nigerian multinational and group structured companies have been urged to wake up to the reality of the new transfer pricing regulations issued by the Federal Inland Revenue Service (FIRS).
Stakeholders at a seminar organised by Pedabo, the Nigerian member firm of Morrison International harped on Advance Pricing Agreement (APA) and the need for aggressive implementation of the new transfer pricing rules.
Speaking at the event, Albert Folorunsho of Pedabo, explained the concept of transfer pricing, its relevance in business, and why it has become a tax issue.
He also took participants through the processes and methods of determining the transfer price, as well as the nature of documentation which companies are expected to put in place to defend the prices used in the valuation of their related party transactions.
In his presentation on the FIRS Expectation for Advance Pricing Agreement (APA), Ajayi Bamidele explained that the new transfer pricing regulations were in line with international best practices, to give effect to general provisions in Section 17 of the Personal Income Tax Act, Section 22 of the Companies Income Tax Act and Section 15 of the Petroleum Profits Tax Act, thereby setting parameters for the determination and verification of the arm’s length value of intercompany transactions.
He further explained that the regulations were aimed at fighting tax evasion through over or under invoicing, providing a level playing field between multinational and local enterprises, and generally ensuring that the taxes paid in Nigeria are appropriate for the economic activities performed in the country.
Bamidele therefore explained that the opportunity for entering into Advance Pricing Agreement with tax payers was based on the desire of FIRS to minimise potential disputes that could arise from transfer pricing.
Sachin Vasudeva spoke on the Indian experience with transfer pricing after ten years of implementation and observed the need for Nigeria to learn from some of the pitfalls suffered by India in the early and indeed current life of their transfer pricing implementation.