• Service: Tax, Global Transfer Pricing Services
  • Type: Regulatory update
  • Date: 2/18/2014

Nigeria - Potential risks in transfer pricing regulations “safe harbor” 

February 18:  When Nigeria’s tax authority—the Federal Inland Revenue Service (FIRS)—published the transfer pricing regulations, taxpayers celebrated the inclusion of safe harbor provisions.

Unfortunately, those celebrations may have been premature. The safe harbor in the transfer pricing regulations might not be as safe as many originally thought.

A safe harbor typically is a statutory provision that applies to a given category of taxpayers or transactions and that relieves them from specific obligations otherwise imposed by the tax legislation by substituting for those obligations exceptional—and usually simpler—options.

Nigerian safe harbor provisions

The Nigerian transfer pricing regulations provide for a safe harbor under Regulation 15.

The regulatory measure provides that a “connected” taxable person would be exempt from the requirements of Regulation 6 (transfer pricing documentation) if the controlled transactions (i.e., those with related entities) are priced in accordance with the requirements of Nigerian statutory provisions, or if the prices of connected transactions have been approved by other government regulatory agencies or authorities established under Nigerian law, and deemed by the FIRS to be at arm’s length.

Other necessary and valid regulatory approvals in the transfer pricing regulations are those issued by the National Office for Technology Acquisition and Promotion (NOTAP), the Department of Petroleum Resources (DPR), the Nigerian National Petroleum Corp. (NNPC), and any other such regulatory authorities or bodies.

Read a February 2014 blog posting by the KPMG member firm in Nigeria: Potential Risks in the Safe Harbor Provisions of Nigeria’s Transfer Pricing Regulations

Contact a tax professional with KPMG's Global Transfer Pricing Services.

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