Nigeria’s revenues can get a boost from Transfer Pricing laws — PWC
LAGOS-The PricewaterhouseCoopers, PWC, Nigeria Limited has said that the proposed regulation on Transfer Pricing, expected to come into effect by mid 2012 will help increase the profitability of Nigerian firms and boost the revenue profile of the country.
Speaking at a briefing in Lagos earlier today, Mr. Taiwo Oyedele, Partner/Director, Tax & Corporate Advisory Services, said Transfer Pricing, TP, is a term used to describe all aspects of inter-company pricing arrangement between related business entities, including transfers of tangible goods, services, intellectual property and financing transactions.
According to Oyedele, taxation currently accounts for about two per cent of Nigeria’s revenue profile, compared to its ability to generate more than 20 per cent of the revenue composition of the country.
He said the proposed regulation on Transfer Pricing, which is being promoted by the Federal Inland Revenue Service, FIRS, is hinged on the need to stem the loss of revenue accruable to companies and the country, adding that the law will help address the various losses incurred by companies in their transactions with their counterparts in other countries.
He said the Transfer Pricing Law will help protect Nigeria’s tax base, increase government revenue through tax and protect the interest of local firms.
He disclosed that the proposed regulation is based on the general anti-avoidance provisions in the various tax laws which require related party transactions to be conducted at arm’s length, which stipulates that parties to a transaction be considered independent and on equal footing.
Arm’s length is used specifically in contract law to arrange an equitable agreement that will stand up to legal scrutiny, even though the parties may have shared interests, such as employer-employee, or are too closely related to be seen as completely independent, such as parties with family ties.
According to him, regulating Transfer Pricing will address issues bothering on determining the actual amount to be charged on goods and services for transaction parties and also in ensuring that the amount charged is appropriate.
He explained that Transfer Pricing is significant for both tax payers and tax administrations because it plays a major role in determining the income and expenditure, and therefore taxable profits, of associated enterprises in different tax jurisdictions.
To this end, Oyedele said PWC is organizing a stakeholders’ workshop to sensitize the public on the workings of the soon-to-introduced policy.
He disclosed that PWC can assist firms in the review and documentation of their transfer pricing policies in compliance with regulatory requirements and also ensure that firms respond promptly to tax audit, resolve disputes and manage exposures concerning Transfer Pricing in prior and future periods.