The Income Tax (County by Country Reporting) Regulations S.I. No.6 of 2018 (“CbC Regulations”) was published in 2018. The requirement to file CbC Reports forms part of the enhanced Transfer Pricing (TP) documentation set out in the BEPS Action 13 report. Regulation 4 of the CbC Regulations provides that Multinational Entities (MNEs), not being the Ultimate Parent Entity (UPE), shall comply with local filing obligation i.e. filing of CbC reports with the Federal Inland Revenue Service (“the Service”), under the circumstances stated therein.
Further clarification is provided by the Service, which states that nothing in this notice will prevent multinational corporations with their headquarters in Nigeria or their surrogate parent organizations from filing CbC reports as per the CbC Regulations.
In September 2013, the Organization for Economic Co-operation and Development (OECD) and G20 countries, working together on an equal footing, adopted an ambitious and comprehensive 15-point Action Plan to address BEPS. The Action Plan aims to ensure that profits are taxed where economic activities generating the profits are performed and where value is created. The Action Plan is based on three Pillars:
• Coherence of corporate tax at the international level
• Substance or value creation
• Cooperation and transparency, coupled with certainty and predictability.
Actions 11 through 14 call for greater transparency, certainty, and predictability to curb BEPS. Specifically, BEPS Action 13 requires the OECD to:
• Develop rules regarding TP documentation to enhance transparency for tax administrations, taking into consideration the compliance costs for businesses.
• The rules to be developed will include a requirement that MNEs provide all governments with needed information on their global allocation of income, economic activity, and taxes paid among countries according to a common template.
In response to this requirement, jurisdictions participating under the BEPS Project agreed on revised standards for Transfer Pricing documentation and a template for Country-by-Country reporting of income, taxes paid, and certain measures of economic activity. On 16 September 2014, the OECD published the “Guidance on Transfer Pricing Documentation and Country-by-Country Reporting” which provided the template for Country-by-Country reporting.
The work on the comprehensive Action Plan for BEPS was concluded in October 2015 and a package of 15 reports was delivered, culminating in new or reinforced international standards as well as producing concrete measures to help countries tackle BEPS. One of these measures is the Country-by-Country reporting under Action 13 of the BEPS Project, which is a minimum standard under the BEPS outcomes.
Nigeria is a member of the Inclusive Framework, a group of jurisdictions, committed to the implementation of the minimum standards of the BEPS-related measures. Towards this end, Nigeria signed the Multilateral Competent Authority Agreement on Country-by-Country Reporting (CbC MCAA) in January 2016 and has produced the Income Tax (Country-by-Country Reporting) Regulations 2018 (“CbC Regulations”) for the implementation of the Country-by-Country Reporting in Nigeria.
Purpose & Applicability of Documents
These Guidelines are issued according to the above commitments, to enable easy compliance with the CbC Regulations and provide guides for completing the template for reporting Multinational Enterprise’s (MNE) group allocation of income, taxes, and business activities on a tax jurisdiction basis. These instructions form an integral part of the model template for the Country-by-Country Report.
These Guidelines are issued to supplement the Income Tax (Country-by-Country Reporting) Regulations, 2018, and shall be applied in a manner consistent with the Regulations and the following documents:
• The Income Tax (Transfer Pricing) Regulations 2018.
• The Guidelines for the Appropriate Use of Information contained in Country-by-Country (CBC) Reports.
• The Guidelines on Transfer Pricing Documentation.
• The OECD (2018) Guidance on the Implementation of Country-by-Country Reporting – BEPS Action 13 as may be updated from time to time; and
• Any other guideline or document that may be issued by the Service from time to time to implement Transfer Pricing or Country-by-Country Reporting in Nigeria.
Nigeria signed the Country-by-Country Multilateral Competent Authority Agreement (CbC MCAA) on the 27th of January 2016 and revised the Income Tax (Country-By-Country Reporting) Regulations in 2018.
OECD formulated BEPS Action 13 ‘Transfer Pricing Documentation and Country-by-Country Reporting’ through public consultation, which provides a template for MNEs to render their annual filing across different tax jurisdictions in which they do business.
The Country-By-Country report filed by MNEs is also used for high-level transfer pricing and BEPs risk assessment, which in turn improves tax transparency to prevent tax evasion or avoidance.
Country-by-country (CBC) reports filed by MNEs generally contain aggregate data on the global information relating to the following information:
• amount of revenue, profit or loss, income tax paid, income tax accrued, capital, accumulated earnings, number of employees, and assets of each jurisdiction in which the MNE Group operates.
Nigeria’s Income Tax (Country-By-Country Reporting) Regulations, 2018 became effective from the 1st of January 2018, and the following are the highlights of the regulation:
• Ultimate Parent Entity of an MNE Group that is resident in Nigeria are required to file Country-By-Country Reporting
• Resident Constituent Entity which is not the Ultimate Parent Entity of an MNE Group is also required to file Country-By-Country Reporting. This is provided that the Ultimate Parent Entity of the MNE Group; is not obligated to file a Country-by-Country Report in its jurisdiction of tax residence; has a current International Agreement to which Nigeria is a party; or there has been a Systemic Failure of the jurisdiction of tax residence of the Ultimate Parent Entity
• Each resident constituent entity of an MNE Group is required to notify the FIRS of its relationship with the MNE group. This is as regards whether it is an Ultimate Parent Entity, Surrogate Parent Entity, or which other Identity. FIRS should be notified no later than the last day of the Reporting Accounting Year of such MNE Group. Non-notification attracts N5,000,000.00 in the first month and N10,000.00 for every day in which the default to notify FIRS continues.
• Filing should contain: Identification of each Constituent Entity of the MNE Group; and disclosure of financial information regarding each jurisdiction in which the MNE operates
• Filing should be done in the prescribed form as contained in the First Schedule to Income Tax (Country-By-Country Reporting) Regulations of 2018.
The form may however be modified by FIRS from time-to-time
• The due date for Country-by-Country Report filing is the day not later than 12 months after the last day of the Reporting Accounting Year of the MNE Group.
• Non or late filing attracts an administrative penalty of N10,000,000.00 in the first month and N1,000,000.00 for every month in which the default continues.
• Declaration of false information in the returns attracts an administrative penalty of N10,000,000.00.
• A Group MNE having total consolidated group revenue of EUR 750 million or its equivalent less than N160,000,000,000.00 during the Accounting Year immediately preceding the Reporting Accounting Year as reflected in its Consolidated Financial Statements for such preceding Accounting Year is Excluded from filing.
Abisola Christopher has over 10 years of experience in accounting, transaction advisory, and tax advisory & compliance. She has worked with local and multinational clients across diverse industries, including oil & gas, financial services, education and engineering (manufacture and sale of marine equipment). She understands local tax regulations in-depth and frequently advises on indirect tax obligations, income tax filings and obligations, and transfer pricing documentation. She is instrumental in several workshops and seminars centred around indirect tax and financial services. In addition, she has contributed to national and international publications on taxation.
Abel Awujoola is a seasoned tax practitioner with over a decade of expertise. He has a proven track record of delivering exceptional results and a passion for exceeding client expectations. He has a penchant for developing comprehensive strategies to minimise tax liabilities while ensuring compliance with ever-evolving regulations.
