Transfer Pricing Documentation: State Inland Revenue Service’s Insights for Multinationals.

85 Multinational Corporations — HEAL THE PLANET


Transfer pricing, the practice of pricing transactions between related entities is a critical issue for multinational corporations (MNCs) operating in Nigeria. Proper documentation of transfer pricing practices is not only a compliance requirement but also essential for ensuring fair taxation and preventing profit shifting. The State Inland Revenue Service (SIRS) in Nigeria recognizes the importance of transfer pricing documentation and offers valuable insights for MNCs. In this article, we will explore transfer pricing, its significance and the SIRS’s perspective on documentation to facilitate tax compliance and transparency.

Understanding Transfer Pricing:

Transfer pricing refers to the pricing of goods, services, or intangible assets transferred between related entities within an MNC. These transactions must be priced at arm’s length, meaning they should reflect the price that unrelated parties would charge in a similar transaction. The objective is to prevent tax evasion by manipulating prices to shift profits to low-tax jurisdictions.

The Significance of Transfer Pricing Documentation:

Proper transfer pricing documentation is crucial for several reasons:

  1. Compliance: It is a legal requirement in Nigeria for MNCs to document their transfer pricing policies and practices.
  2. Transparency: Documentation provides transparency and demonstrates compliance with arm’s length pricing, which is essential for building trust with tax authorities.
  3. Risk Mitigation: Adequate documentation reduces the risk of audits, penalties, and disputes with the SIRS.
  4. Business Strategy: Documentation helps MNCs align their transfer pricing strategies with their overall business goals and objectives.

SIRS’s Insights on Transfer Pricing Documentation:

The SIRS provides valuable insights for MNCs regarding transfer pricing documentation:

  1. Maintain Detailed Records: MNCs should maintain comprehensive records of their transfer pricing policies, methods and transactions. These records should demonstrate compliance with arm’s length pricing.
  2. Contemporaneous Documentation: Documentation should be prepared contemporaneously with the transactions. Waiting until an audit occurs can lead to difficulties in assembling necessary information.
  3. Functional Analysis: MNCs should conduct a functional analysis that describes the functions, assets and risks of related entities involved in the transactions.
  4. Economic Analysis: An economic analysis, including benchmarking studies, should be conducted to support the arm’s length nature of the pricing.
  5. Documentation Format: The SIRS recommends a standardized format for transfer pricing documentation, including a master file and local file. This format ensures consistency and ease of review.
  6. Advance Pricing Agreements (APAs): MNCs are encouraged to consider entering into APAs with the SIRS. These agreements provide certainty regarding transfer pricing methods and can prevent disputes.


Transfer pricing documentation is a critical aspect of tax compliance and transparency for MNCs operating in Nigeria. The SIRS’s insights on maintaining detailed and contemporaneous records, conducting functional and economic analyses, and considering APAs can greatly assist MNCs in navigating the complexities of transfer pricing. By following these guidelines, MNCs not only ensure compliance but also build a foundation of trust with tax authorities, reducing the risk of disputes and penalties. In an increasingly interconnected global economy, responsible transfer pricing practices are essential for fair taxation and the sustainable growth of businesses in Nigeria.

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.