Related-Party Transactions

Introduction: Transfer pricing is a critical aspect of international business operations, especially for multinational companies. It involves setting prices for goods, services, or intellectual property transferred between related entities within the same corporate group. Nigeria, like many countries, has recognized the importance of regulating transfer pricing to prevent profit shifting and protect its tax base. The Finance Act 2020 introduces significant changes to Nigeria’s transfer pricing regulations, impacting businesses engaged in related-party transactions. In this article, we will explore the Finance Act 2020’s implications for transfer pricing and related-party transactions. Key Provisions Impacting Transfer Pricing: Implication: Multinational companies must ensure that the prices of goods, services, or intellectual property transferred within the group reflect market rates. Implication: Multinational companies must maintain comprehensive transfer pricing documentation to substantiate their pricing methodologies. Implication: Failure to comply with documentation requirements can result in significant financial penalties. Implication: Multinational companies can seek certainty and predictability in their transfer pricing arrangements through APAs. Navigating Transfer Pricing Compliance: Benefits of Compliance: Conclusion: The Finance Act 2020’s amendments to transfer pricing regulations underscore Nigeria’s commitment to preventing profit shifting and protecting its tax base. Multinational companies engaged in related-party transactions must carefully assess their transfer pricing practices, develop robust documentation, and ensure compliance with the arm’s length principle. By doing so, they can navigate the complexities of transfer pricing regulations, mitigate risks, and maintain financial transparency within their organizations. 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, www.sunmoladavid.com. You can also reach us via WhatsApp at +2348038460036.