FIRS Issues Guidelines on Advance Pricing Agreements in Nigeria
In the evolving global tax landscape, related-party transactions and transfer pricing (TP) have become pivotal issues for tax authorities worldwide. Recognizing the complexities and potential disputes surrounding TP, the Federal Inland Revenue Service (FIRS) recently introduced comprehensive Guidelines on Advance Pricing Agreements (APAs) through Information Circular No. 2024/006, which was published on 27 November 2024 (hereafter referred to as “the Guidelines” or “the Circular”).
The Guidelines have an effective date of 1 January 2025 and provide a structured framework for taxpayers to negotiate predetermined TP methodologies with the FIRS that would govern their proposed controlled transactions, thereby reducing uncertainties and fostering trust.
The major significance of the Guidelines is the mitigation of the risks of double taxation and prolonged TP disputes – which typically lead to significant, alleged additional tax liabilities – for multinational enterprises (MNEs) operating in Nigeria. The Guidelines also aim to promote Nigeria’s tax compliance standards in alignment with global best practices, to ensure that related-party transactions involving entities that have a taxable presence in Nigeria adhere to the Arm’s Length Principle.
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