In 2012, the Federal Inland Revenue Service (FIRS) published in the official gazette, the Income Tax (Transfer Pricing) Regulations No 1, 2012 (the Regulations).
One of the key requirements in the Regulations is for companies to conduct their related party transactions at arm’s length. This means that the conditions made or imposed between two or more Connected Taxable Persons (CTPs) in their commercial or financial relations should be similar with those which would be made between independent enterprises. It is important that tax payers pay attention to how these transactions are carried out to ensure that they are consistent with the arm’s length principle.
This report explores some key considerations for determining if an intragroup service can be deemed to have been rendered; and how to determine if the amount charged is in accordance with the arm’s length principle.
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