![\"Ken](\"http:\/\/www.doingbusinessin.fr\/wp-content\/uploads\/2013\/09\/ken-igbokwe.png\")
<\/a>Ken Igbokwe,
Country Head<\/p><\/div>\n
A<\/strong>s the Nigerian economy diversifies away from its traditional oil & gas mainstay, tax authorities are awakening to the need for proper transfer pricing (TP) regulations. The increasing scale of international businesses and complexity of cross border trade requires closer attention to transactions between related parties, and ensuring that tax revenues are not improperly allocated to other tax jurisdictions.<\/p>\n \u201cSpecific TP regulations are being developed for Nigeria by the Federal Inland Revenue Service (FIRS),\u201d explains Ken Aitken, Head of Tax at PwC, \u201cbased on the general anti-avoidance provisions in the various tax laws which require related-party transactions to be conducted at arm\u2019s length. The regulations are expected to be issued and become effective in 2012.\u201d<\/p>\n \u201cThese new TP policies will have an impact on any related-party transaction\u201d, pursues Taiwo Oyedele, Partner and Tax Director at PwC, \u201cwhether you are a member of a group (local or multinational) involved in any transactions with a related party, and whether a price is charged or not.\u201d<\/p>\n The fields of application are manifold, and include purchases of materials, finished products, procurement of services, inter-company loans or receivables, agreement for use of intellectual property, and more.<\/p>\n \u201cWe advise our clients to prepare for these new TP regulations with half a dozen recommendations, which include identification of any related-party transactions, reviewing current TP practices, analyzing the application of these policies, and more,\u201d concludes Ken Aitken.<\/p>\n Although the PwC shortlist of recommendations may simplify a CFO\u2019s life, any finance director handling Nigerian books should be aware of challenges down the road. \u201cThe arm\u2019s length principle may appear simple,\u201d says Oyedele, \u201cbut applying it could be a Herculean task.\u201d How do you find information on similar transactions between related parties in an environment where local databases are not available? Even where information on other industry players is available, there is no guarantee that the conditions and circumstances of the transactions will be sufficiently similar.<\/p>\n To illustrate some of the pitfalls, PwC uses two examples. The first has to do with disparities between customs import values and TP documentation. \u201cThere has been a lingering and prevalent issue, particularly in frontier markets, where custom duties are handled by separate tax authorities,\u201d explains Aitken. \u201cHowever, there are instances where reliance has been placed by the courts on customs valuations. In our experience customs do not give refunds due to a TP adjustment done by the income tax authorities.\u201d The second example concerns upstream oil companies needing to document their TP policies beforehand. In the case of discrepancies with respect to benchmarking by government regulators, such written policies will be required.<\/p>\n Furthermore, the existence of a global TP policy may not necessarily eliminate the requirement for additional work as there may be Nigeria-specific issues that have to be addressed and which create a need to localize the global policy.<\/p>\n
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