Share with your friends

Nigeria: Benchmarking related-party transactions, transfer pricing methods (tribunal decision)

Nigeria: Benchmarking related-party transactions

The Tax Appeal Tribunal, in Lagos, accepted the tax authorities’ benchmarking of the taxpayer’s transfer pricing transactions using the Transactional Net Margin Method (TNMM) in a case concerning purchases of plastics and petrochemicals by the taxpayer from a foreign related party.


Related content

The case is: Prime Plastichem Nigeria Ltd. v. Federal Inland Revenue Service (19 February 2020)

The taxpayer, a private limited liability company, engaged in the import and trading of plastics and petrochemicals. The tax authorities conducted an audit of the taxpayer’s transactions with related parties and determined an additional tax liability of over N1.7 billion after applying the TNMM in its analysis of the taxpayer’s transfer pricing transactions. The taxpayer sought judicial review by the tribunal.

The issues before the tribunal included:

  • Whether the action of the Federal Inland Revenue Service (FIRS) in benchmarking the taxpayer’s transfer pricing transactions using the TNMM for 2013 and 2014 was valid and in accordance with Nigeria’s transfer pricing regulations and the Organisation for Economic Cooperation and Development/United Nation (OECD/UN) transfer pricing guidelines
  • Whether the use by FIRS of the gross profit margin method as the profit level indicator for the transfer pricing transactions was valid and in accordance with the transfer pricing regulations and OECD/UN guidelines
  • Whether the taxpayer’s failure to timely file supported the imposition of penalties and interest imposed by FIRS

The tribunal decided in favor of FIRS on all issues, and rejected the taxpayer’s appeal.

Read a February 2020 report prepared by the KPMG member firm in Nigeria

The KPMG logo and name are trademarks of KPMG International. KPMG International is a Swiss cooperative that serves as a coordinating entity for a network of independent member firms. KPMG International provides no audit or other client services. Such services are provided solely by member firms in their respective geographic areas. KPMG International and its member firms are legally distinct and separate entities. They are not and nothing contained herein shall be construed to place these entities in the relationship of parents, subsidiaries, agents, partners, or joint venturers. No member firm has any authority (actual, apparent, implied or otherwise) to obligate or bind KPMG International or any member firm in any manner whatsoever. The information contained in herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's Federal Tax Legislative and Regulatory Services Group at: + 1 202 533 4366, 1801 K Street NW, Washington, DC 20006.

Connect with us


Want to do business with KPMG?


loading image Request for proposal