FIRS and Transfer Pricing Documentation: Best Practices for Multinational Enterprises.


In an increasingly globalized business landscape, multinational enterprises (MNEs) operate across borders, engaging in cross-border transactions with related entities. This makes transfer pricing a critical aspect of their tax compliance. The Federal Inland Revenue Service (FIRS) in Nigeria, like tax authorities worldwide, closely scrutinizes transfer pricing practices to ensure they align with arm’s length principles and prevent profit shifting. In this article, we will explore best practices for MNEs when it comes to FIRS and transfer pricing documentation.

Understanding Transfer Pricing and FIRS Regulations:

  1. Transfer Pricing Defined: Transfer pricing refers to the pricing of goods, services, or intangibles exchanged between related entities within an MNE group.
  2. Arm’s Length Principle: Transactions between related entities should be priced as if they were between unrelated, independent parties.
  3. FIRS Regulations: FIRS has issued transfer pricing regulations and documentation requirements to ensure fair taxation and prevent tax evasion.

Best Practices for MNEs:

  1. Robust Documentation: Maintain comprehensive transfer pricing documentation that includes detailed descriptions of controlled transactions, financial data, comparability analysis, and the selection of the most appropriate transfer pricing method.
  2. Local File and Master File: Prepare a local file for each Nigerian entity that outlines specific transactions, and a master file providing a broader overview of the MNE group’s global operations.
  3. Contemporaneous Documentation: Ensure that transfer pricing documentation is prepared contemporaneously, meaning it is in place before the tax return filing deadline.
  4. Transfer Pricing Policy: Develop and maintain a well-documented transfer pricing policy that reflects the arm’s length principle and aligns with the group’s business strategy.
  5. Transfer Pricing Methodology: Select an appropriate transfer pricing method based on the nature of the transaction and ensure it is consistently applied across the group.
  6. Comparability Analysis: Conduct a robust comparability analysis to identify comparable uncontrolled transactions for benchmarking purposes.
  7. Functional Analysis: Clearly define the functions, risks, and assets of each related entity involved in the controlled transactions.
  8. Advance Pricing Agreements (APAs): Consider negotiating APAs with FIRS to provide certainty and avoid transfer pricing disputes.
  9. Documentation Retention: Maintain transfer pricing documentation for at least five years from the end of the relevant fiscal year.
  10. Professional Assistance: Engage transfer pricing experts or tax professionals with expertise in Nigerian regulations to ensure compliance.

The Benefits of Compliance:

  1. Minimizing Risks: Robust transfer pricing documentation minimizes the risk of penalties, disputes, and double taxation.
  2. Enhancing Reputation: Demonstrating compliance and transparency in transfer pricing can enhance an MNE’s reputation with tax authorities and stakeholders.
  3. Efficient Resource Allocation: Effective transfer pricing practices help MNEs allocate resources efficiently and optimize their global tax position.


Navigating FIRS transfer pricing regulations requires careful attention to documentation and compliance. MNEs operating in Nigeria should prioritize the development and maintenance of comprehensive transfer pricing documentation that adheres to international standards and FIRS regulations. By doing so, they not only minimize risks and ensure compliance but also contribute to a transparent and responsible business environment that benefits both their operations and the Nigerian economy as a whole.

For professional advice on Accountancy, Transfer Pricing, Tax, Assurance, Outsourcing, online accounting support, Company Registration, and CAC matters, please contact Sunmola David & CO (Chartered Accountants & Tax Practitioners) at Lagos, Ogun state Nigeria offices, . You can also reach us via WhatsApp at +2348038460036.