Name: Baker Tilly
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We would like to draw your attention to the Revised Income Tax Transfer pricing Regulations 2018 recently released by the Federal Inland Revenue Service (FIRS). The new regulation has repealed the Income Tax (Transfer Pricing) Regulation No. 1 of 2012 and has an effective date of 12 March, 2018.

The Revised Regulation requires that:

The tax paper fills an Update Transfer Pricing Declaration Form in any of the following circumstance:
1. where there is a merger of the taxpayer or its parent company;
2. where there is an acquisition of up to 20% of the taxpayer or its parent company by previously unrelated entity;
3. where there is any other change in the structure or arrangement of the taxpayer; and
4. where there is an appointment or retirement of a director of a connected person.
The TP disclosure form is also to be completed annually.
The TP documentation should now involve connected persons preparing a master file, local file and have a detailed list of information and analysis.
Unlike the 2012 Regulations, the Revised Transfer Pricing Regulations has introduced penalties for TP related offences. Please find below highlights of the offences and penalties.

	TP Offense	Penalty
1.	Failure to file TP declaration within the specified period of months after financial year end	N10 million in the first instance and N10,000 for every day the failure continues.
2.	Failure to file updated TP declaration/notification about changes in directors.	N25,000 for each day in which failure continues.
3.	Failure to file TP disclosures within the specific period.	The higher of N10 million or 1% of the value of the controlled transactions not disclosed, and N10,000 every day the failure continues.
4.	Incorrect disclosure of transaction	The higher of N10 million or 1% of the value of the controlled transaction incorrectly disclosed.
5.	Failure to file TP documentation upon request.	The higher of N10 million or 1% of the value of the controlled transaction not disclosed and N10,000 every day the failure continues.
6.	Failure to furnish information or document within the specified period	1% of the value of each controlled transaction for which the information or documentation was required and N10,000 every day the failure continues.

Implications of the new regulation

The revised Transfer Pricing Regulations come with stiffer TP regime in Nigeria with the introduction of penalties. In the light of these revisions, there is need for taxpayers to brace up for the new challenges that come with the revision. We therefore encourage you to take the following steps:

Review your related party transactions to ensure full compliance with the arm’s length principle and documentation requirement;
Have your company’s transfer pricing documentation in place;
Put in place machinery to ensure all TP filings (TP declaration and disclosure) are done annually and on time.
Ensure that your financial statements are audited on time as a copy of the audited financial statements is required to be filed along with the Transfer Pricing returns. A TP returns not filed within 6 months after the accounting year end will attract penalty of N10 million in the first instance and N10,000 for every day the failure continues.

Revised Transfer Pricing (TP) Regulation

Implications of the new regulation