June 14, 2022
The June Transfer Pricing (TP) filing season is here, with the deadline only a few weeks away! June represents a very busy period for taxpayers, tax consultants and tax authorities, primarily because most companies in Nigeria have a December year-end and are required by law to file their TP returns six (6) months after the year-end i.e. on or before 30 June of the subsequent year. As such, taxpayers and tax consultants will be busy reviewing documents and preparing returns for filing with the tax authorities.
The drive to ensure compliance before the filing deadline is largely motivated by the existence of penalties for late filing which are quite significant for TP (minimum of ₦10 million). Also, the Federal Inland Revenue Service (FIRS) in recent years has been imposing penalties on erring taxpayers.
The FIRS in 2020 introduced E-TP PLAT 2.0 (the Platform) for the online filing of TP returns. The Platform was introduced to enable easy filing of TP documents. In 2021, the FIRS communicated that TP returns will only be accepted if filed on the e-filing platform. As such, the 2021 Financial Year (FY) returns due this June have to be filed on the Platform.
Given the aggressive enforcement of TP compliance by the FIRS and the potential huge penalties, it is important for taxpayers to understand how the Platform works and how to navigate effectively to ensure that the TP returns are filed on time.
TP Returns Filing in Nigeria
The Nigerian TP Regulations require taxpayers with related parties to comply with certain obligations, including filing of annual TP statutory returns (TP declaration and disclosure forms) on or before six (6) months after the end of its accounting year or eighteen months after its date of incorporation, whichever is earlier.
The TP declaration form includes information about the company’s business, shareholders, directors, related parties etc. and should be filed in the first year of compliance with updates made in years where there are changes to the company’s business e.g. changes in shareholding structure, directors etc. On the other hand, the TP disclosure form contains details of the related party transactions conducted by an entity in a particular FY, such as the values, the related parties and the TP methods selected to test the transaction. The disclosure form is to be filed annually.
The 2018 TP Regulations introduced steep administrative penalties for the failure to file TP returns as at when due. These include:
i. Failure to file TP declaration within the specified period – ₦10 million in the first instance and ₦10,000 for every day the failure continues.
ii. Failure to file updated TP declaration/ notification about changes in directors – ₦25,000 for each day in which the failure continues.
iii. Failure to file TP disclosures within the specified period – the higher of: ₦10 million or 1% percent of the value of the controlled transaction not disclosed, and ₦10,000 for every day the failure continues
iv. Incorrect disclosure of transactions – the higher of: ₦10 million or 1% percent of the value of the controlled transaction incorrectly disclosed.
The E-TP PLAT 2.0
Prior to the introduction of the Platform, TP returns were filed at the FIRS’ office using hard copies of the TP forms and accompanied by supporting documents including Financial Statements (FS), copies of tax computations and self-assessment forms. Copies of the filed returns were stamped and acknowledged while the FIRS kept the original documents. This meant that the FIRS was bombarded with huge influx of people with heaps of documents by the filing deadline. This created an issue with storage of these documents.
In its bid to reduce the number of hard copy filing and its attendant challenges, the FIRS began a switch to electronic filing of TP returns in 2019, with the Platform officially launched in March 2020. It was not until 2021 that the Service began to strictly enforce e-filing. This may have been due to disruption to businesses resulting from the coronavirus pandemic. In 2021, where the FIRS accepted hard copy filings, it was only after the online filing had been completed and the evidence of this was provided to the Service. However, going forward, TP returns are expected to the filed on the Platform.
Taxpayers are required to complete an E-TP access application form (the Form) to enable them register and obtain log-in details to the Platform.
The Platform allows for filing of the TP returns, Country-by- Country (CbC) Reporting notification forms and CbC reports, alongside other relevant attachments.