Transfer Pricing Compliance for Nigerian Startups: Building a Solid Foundation.

Nigerian startups, others' funding hits $20bn – Report


The startup landscape in Nigeria is thriving, with entrepreneurs and innovators driving economic growth through new ventures. In this era of global connectivity, Nigerian startups often engage in cross-border transactions, including technology transfers, intellectual property (IP) licensing, and other related-party transactions within their multinational enterprise (MNE) structures. However, to ensure compliance with Nigerian tax laws and international standards, startups must establish a robust foundation for transfer pricing compliance. In this article, we will explore the importance of transfer pricing compliance for Nigerian startups and offer guidance on building that essential foundation.

The Vital Role of Startups in Nigeria:

Startups are the lifeblood of economic development, contributing to innovation, job creation and the diversification of the Nigerian economy. In this increasingly globalized business environment, startups can swiftly expand their operations internationally, creating the need to navigate transfer pricing regulations.

Challenges in Transfer Pricing for Startups:

Startups in Nigeria face specific challenges in managing transfer pricing compliance:

  1. Limited Resources: Startups often have limited resources, making it challenging to dedicate personnel and finances to transfer pricing compliance efforts.
  2. Complex Transactions: Cross-border transactions involving technology, IP and service arrangements can be intricate and require careful documentation.
  3. Compliance Knowledge: Many startups may lack in-house expertise on transfer pricing regulations and best practices.

Building a Solid Transfer Pricing Foundation for Startups:

To establish a robust transfer pricing compliance foundation, Nigerian startups should consider the following steps:

  1. Early Awareness: Startups should recognize the importance of transfer pricing compliance from the outset. It’s easier and more cost-effective to establish proper compliance practices early.
  2. Functional Analysis: Conduct a functional analysis to identify and document the functions, assets, and risks associated with their operations. This analysis forms the basis for determining arm’s length pricing.
  3. Documentation: Maintain comprehensive documentation of related-party transactions, including service agreements, technology transfers and IP licensing arrangements. Document the rationale for pricing decisions.
  4. Comparability Analysis: Perform a comparability analysis to demonstrate that the terms of transactions align with what unrelated parties would agree to under similar circumstances. Look for comparable data to support pricing decisions.
  5. Engage Transfer Pricing Experts: Seek guidance from accounting and tax professionals experienced in transfer pricing. They can provide essential insights and help develop compliance strategies tailored to the startup’s unique circumstances.
  6. Stay Informed: Keep up-to-date with changes in transfer pricing regulations, both in Nigeria and internationally. The landscape is continuously evolving, and awareness is key to maintaining compliance.

Challenges and Regulatory Environment:

Nigerian startups should be aware of regulatory developments related to transfer pricing. Tax authorities may issue guidelines or regulations that impact compliance requirements for startups engaged in cross-border transactions.


Nigerian startups are essential drivers of economic growth and innovation. As they expand their operations, it is vital to establish a solid foundation for transfer pricing compliance. By building early awareness, conducting functional and comparability analyses, maintaining comprehensive documentation and seeking expert guidance, startups can navigate the complexities of transfer pricing compliance while focusing on their core business objectives. Compliance not only ensures adherence to Nigerian tax regulations but also safeguards the future growth and success of these dynamic ventures.

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.