The Federal Inland Revenue Service (FIRS) has released the revised Income Tax (Transfer Pricing) Regulations, 2018 (the new Regulations). The new Regulations repealed the Income Tax (Transfer Pricing) Regulations, 2012 (the old Regulations) which took effect on 2 August 2012.
The new Regulations have a commencement date of 12 March 2018 and will apply to basis periods of tax payers beginning after that date.
The significant changes in the new Regulations are as follows:
The new Regulations stipulate exorbitant penalties for non-compliance. These are as follows:
|Failure to submit Declaration Form within statutory deadline||N10 million plus N10,000 for every day in which the failure continues|
|Failure to submit updated Declaration Form to notify FIRS of changes in structure, arrangement or circumstances considered to influence connected person||N25,000 for every day in which the failure continues|
|Failure to appropriately disclose controlled transactions||Higher of N10 million or 1% of the value of the incorrectly disclosed controlled transactions|
|Incorrect disclosure of controlled transactions||N10 million or 1% of the value of the controlled transactions incorrectly disclosed|
|Failure to provide Transfer Pricing (TP) documentation within the stipulated period||Higher of N10 million or 1% of the total value of all controlled transactions plus N10,000 for every day in which the failure continues|
|Failure to provide other information required by the FIRS within the stipulated period||1% of the value of each controlled transactions for which information is required plus N10,000 for every day in which the failure continues|
2. Procurement arrangement
The new Regulations require companies to include supporting documents in respect of goods, assets, services or other item procured from unrelated parties, through a connected person, in the contemporaneous documentation. The documents include “contracts, invoices, bills or similar documents issued by the unrelated person from whom the items originated”.
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