• Service: Tax, Global Transfer Pricing Services, Global Compliance Management Services, International Tax
  • Type: Regulatory update
  • Date: 7/24/2014

Nigeria - Taxation of non-resident companies, transfer pricing implications  

July 24: Officials with the Transfer Pricing Division of Nigeria’s Federal Inland Revenue Service today announced a policy change and stated that non-resident companies will be required to file their returns in accordance with section 55 of the income tax law for companies.

Therefore, non-resident companies that, up to now, have filed their returns on a “turnover basis,” will need to file their tax returns based on audited accounts, in reporting income from their operations in Nigeria.

The Federal Inland Revenue Service officials said that this change is effective immediately. Accordingly, 2014 tax returns prepared and filed on a deemed profit basis would be “null and void,” and companies would need to resubmit their tax returns in accordance with section 55 or be subject to the imposition of penalties.

KPMG observation

Because of this development—and its apparent immediate application—potential actions that non-resident companies may want to consider include:

  • Segregating and auditing their Nigerian operations
  • Evaluating deductible costs—in particular, allocated costs
  • Considering transfer pricing implications of related-party transactions

It is not clear, however, if the tax authorizes would still tax a company on the basis of actual profits when this amount is less than the 20% deemed profit threshold, or instead tax the company on the basis of section 55 (i.e., turnover basis).

Read a July 2014 report(PDF 90KB) prepared by the KPMG member firm in Nigeria: Non-resident companies to now file tax returns with audited financial statements

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

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