Transfer Pricing Under NTA 2025: Essential Guide for Multinationals

How the Nigeria Tax Act 2025 reshapes transfer pricing for multinationals. CFC rules, EBITDA caps, PE changes, and compliance steps explained clearly.

Transfer pricing under the NTA 2025 carries higher stakes than ever for multinationals operating in Nigeria. The Nigeria Tax Act 2025 — effective from 1 January 2026 — did not merely consolidate old tax statutes. It introduced controlled foreign company rules, broadened the definition of permanent establishment, expanded interest deductibility limits to cover both local and foreign connected-party loans, and armed the newly established Nigeria Revenue Service (NRS) with digital enforcement tools that can cross-reference payroll, bank data, and tax filings.

If your group has intercompany transactions touching Nigeria, your transfer pricing policies, documentation, and risk exposure all need a fresh review.

The Transfer Pricing Framework After the NTA 2025

Nigeria’s transfer pricing regime rests on two pillars: the substantive tax provisions in the NTA 2025 and the procedural requirements in the Income Tax (Transfer Pricing) Regulations 2018, which remain in force. The arm’s length principle sits at the centre of both — intercompany transactions between connected persons must reflect pricing that independent parties would agree to under comparable conditions.

What the NTA 2025 changed is the surrounding landscape. The old framework spread transfer pricing-relevant provisions across the Companies Income Tax Act, Personal Income Tax Act, and various Finance Act amendments. The NTA consolidates these into a single statute and adds new anti-avoidance tools that directly affect how multinationals structure their Nigerian operations.

The NRS (which replaced FIRS from January 2026 under the Nigeria Revenue Service Establishment Act 2025) retains all the enforcement powers of its predecessor, including the authority to adjust taxable profits where intercompany transactions deviate from arm’s length pricing. What has changed is the breadth of transactions that now fall within reach and the severity of consequences for getting it wrong.

Key NTA 2025 Changes That Affect Transfer Pricing

1. Controlled Foreign Company (CFC) Rules

This is arguably the most significant new provision for multinationals with Nigerian parent companies. Section 6(2) of the NTA introduces CFC rules for the first time in Nigerian tax law. Where a foreign company is controlled by a Nigerian company and does not distribute profits attributable to the Nigerian parent within one year, those profits are deemed distributed and included in the Nigerian company’s taxable income.

The practical effect is that Nigerian parent companies can no longer defer tax on profits parked in low-tax foreign subsidiaries. If a Nigerian group holds a subsidiary in a jurisdiction with minimal or no income tax, the profits of that subsidiary are now taxable in Nigeria — regardless of whether dividends are actually paid.

While the NTA does not specify the minimum shareholding threshold for control, international practice typically treats ownership above 50% of shares or voting rights as the trigger. The NRS is expected to issue further guidance on implementation. Until then, any Nigerian company with majority-owned foreign subsidiaries should assume the CFC rules apply to them.

For transfer pricing, this changes the calculus. Structures designed to shift profits to low-tax affiliates now face a double risk: the NRS can challenge the intercompany pricing under arm’s length rules, and even if the pricing holds, the CFC rules can pull the offshore profits back into the Nigerian tax net.

2. Top-Up Tax and the 15% Minimum Effective Tax Rate

Section 57 of the NTA introduces a minimum effective tax rate (ETR) of 15%, aligned with the OECD’s Pillar 2 framework. This applies to two categories of companies: constituent entities of multinational enterprise (MNE) groups with global turnover of €750 million or more, and any other company with aggregate annual turnover of ₦20 billion or above.

Where a foreign subsidiary of a Nigerian parent company pays income tax at an effective rate below 15% in its jurisdiction, the Nigerian parent must pay a top-up tax to bring the overall rate to 15%. This closes the gap that CFC rules alone might not fully address — even if a subsidiary is in a country with some tax, if the effective rate is below 15%, the top-up applies.

For transfer pricing purposes, the ETR adds another layer to intercompany pricing analysis. A transfer pricing structure that successfully shifts profits to a 5% tax jurisdiction no longer saves the group money if the Nigerian parent must pay a 10% top-up. The economic incentive for aggressive pricing diminishes substantially.

3. Expanded Interest Deductibility Limits

The 30% EBITDA cap on interest deductions, originally introduced by the Finance Act 2019 for foreign connected-party debt, has been retained and broadened under the NTA 2025. It now covers both local and foreign related-party loan arrangements. Interest expense on debt from connected persons that exceeds 30% of the Nigerian company’s earnings before interest, tax, depreciation, and amortisation is non-deductible. Excess interest can be carried forward for up to five years.

Banking and insurance subsidiaries of foreign companies are exempt from this restriction. For everyone else, intercompany financing arrangements — management fees structured as loans, back-to-back lending, and cash pooling — all need to be tested against this cap.

The transfer pricing implication is direct: the interest rate on a connected-party loan may pass the arm’s length test, but the total interest expense may still be disallowed if it pushes past the 30% EBITDA threshold. Multinationals need to model both the pricing and the quantum of intercompany debt.

4. Broader Definition of Permanent Establishment

The NTA 2025 significantly expands what constitutes a permanent establishment (PE) in Nigeria. Beyond traditional fixed places of business, PE now includes project-based activities such as construction or installation (even if fragmented or partially offshore), and service-based presence through employees, agents, or subcontractors. The focus has shifted from legal form to economic substance.

For transfer pricing, a broader PE definition means more foreign entities may be deemed to have taxable presence in Nigeria. Where a PE is established, profits must be attributed to it — and that attribution must follow arm’s length principles. Companies that previously structured Nigerian activities through short-term service contracts or fragmented projects to avoid PE status should reassess those arrangements.

5. Expanded Scope of Taxable Income for Non-Residents

Under the NTA 2025, payments by Nigerian companies to non-resident connected parties for offshore services are now explicitly taxable. This includes management fees, technical service fees, and consultancy fees paid to group companies abroad, with limited exceptions. Royalties and fees for patents paid by non-resident companies to connected parties are non-deductible for the Nigerian entity.

The definition of “Nigerian Company” has also been expanded to include entities whose central or effective place of management or control is in Nigeria — even if they are incorporated elsewhere. This can render foreign holding companies tax-resident in Nigeria, subjecting their worldwide income to Nigerian tax.

From a transfer pricing perspective, these provisions mean that intercompany service charges, licensing fees, and management fees flowing out of Nigeria face increased scrutiny. The NRS can challenge both the arm’s length nature of the pricing and the underlying substance of the services.

6. Mandatory Disclosure of Tax Planning Arrangements

Under the Nigeria Tax Administration Act 2025 (NTAA), taxpayers must disclose any arrangement whose principal purpose is to obtain a tax advantage. This includes arrangements that shift income or profits to other jurisdictions inconsistently with economic substance, non-arm’s length dealings between related parties, and structures that convert taxable income into non-taxable income.

Disclosures must be made within 30 days of the arrangement being implemented or the taxpayer becoming aware of it. The obligation extends to advisers, promoters, and intermediaries — not just the taxpayer itself. Routine commercial transactions with genuine economic substance and transactions fully compliant with arm’s length standards where documentation exists are excluded from disclosure.

For multinationals, this means transfer pricing structures that are aggressive or novel should be disclosed proactively. The penalty for non-disclosure can be more costly than the tax itself.

Transfer Pricing Documentation Requirements

The Income Tax (Transfer Pricing) Regulations 2018 continue to govern documentation obligations. The three-tier structure aligns with the OECD framework:

Master File

A high-level overview of the MNE group’s global business operations, organisational structure, transfer pricing policies, and allocation of income and economic activity. This file must provide the NRS with a bird’s-eye view of the group’s intercompany transactions.

Local File

Detailed information about the Nigerian entity’s specific intercompany transactions, including the nature and terms of each transaction, the transfer pricing method applied, comparability analysis, and the rationale for selecting the method. This is the document the NRS will scrutinise most closely during an audit.

Country-by-Country Report (CbCR)

Required for MNE groups with consolidated group revenue of ₦160 billion or more. The CbCR provides jurisdiction-by-jurisdiction data on revenue, profit, tax paid, employees, and assets — giving the NRS a global picture of where profits are reported relative to where economic activity occurs.

Taxpayers with total intercompany transactions below ₦300 million may opt not to maintain contemporaneous transfer pricing documentation, but they must be prepared to produce it within 90 days if the NRS requests it. The arm’s length obligation applies regardless of whether documentation is maintained proactively.

Filing Deadlines

A Transfer Pricing Declaration Form must be filed no later than 18 months after incorporation or within six months after the end of the accounting year, whichever is earlier. An updated form is required when there is a merger, acquisition of 20% or more of the entity or its parent, or any other material change in the group structure.

The Five Accepted Transfer Pricing Methods

The Transfer Pricing Regulations 2018 recognise five methods, consistent with OECD guidelines. The taxpayer must select the most appropriate method based on the nature of the transaction and the availability of comparable data:

Alternative methods may be used if the taxpayer can demonstrate that none of the five standard methods can reasonably be applied and the chosen approach produces an arm’s length outcome. The interquartile range is the accepted statistical measure where comparability produces a range of results.

Advance Pricing Agreements: A New Tool

From 1 January 2025, the NRS (then FIRS) introduced formal Advance Pricing Agreement (APA) guidelines — the first in Nigeria’s history. An APA is a binding agreement between the taxpayer and the NRS that establishes in advance the transfer pricing methodology for specified intercompany transactions over a fixed period of up to three years.

APAs can be unilateral (between the taxpayer and the NRS alone), bilateral (involving the taxpayer and a related party’s tax authority in another country), or multilateral (involving multiple jurisdictions). For multinationals with significant, recurring intercompany transactions in Nigeria, an APA offers certainty and reduces the risk of costly disputes during audits.

The APA process involves an application, a pre-filing conference, negotiation, and a formal agreement. While it requires upfront investment in time and professional fees, the payoff is predictable tax outcomes for the agreement’s duration. If your group’s Nigerian intercompany transactions are material and recurring, exploring an APA is worth the conversation. Reach out to a specialist through our Tax Professional Directory if you need guidance.

Practical Example: How the New Rules Interact

Consider a Nigerian subsidiary of a European MNE group. The subsidiary imports finished goods from the parent company, pays management fees to a regional hub in a low-tax jurisdiction, and services an intercompany loan from the parent. Here is how the NTA 2025 provisions layer on top of each other:

Goods purchases: The import prices must satisfy the arm’s length principle. The NRS can use the CUP or TNMM method to test whether the subsidiary’s margins are consistent with comparable independent distributors.

Management fees: The fees paid to the regional hub must reflect genuine services rendered at arm’s length prices. Under the NTA 2025, offshore service payments to connected parties are taxable in Nigeria unless an exemption applies. If the hub is in a low-tax jurisdiction and the management fees erode the Nigerian subsidiary’s profits, the NRS has grounds to challenge both the pricing and the underlying substance.

Intercompany loan: The interest rate must be arm’s length, and the total interest expense is capped at 30% of the subsidiary’s EBITDA. If the subsidiary’s EBITDA is ₦2 billion and the annual interest charge is ₦800 million, only ₦600 million (30% of EBITDA) is deductible. The remaining ₦200 million is added back to taxable income. The excess can be carried forward for up to five years.

CFC exposure: If the regional hub is controlled by a Nigerian entity (directly or through the group structure), the hub’s undistributed profits may be deemed taxable in Nigeria under the CFC rules.

ETR check: If the hub’s effective tax rate is below 15% and the group’s consolidated revenue exceeds €750 million, a top-up tax applies at the Nigerian parent level.

The cumulative effect is that structures relying on profit-shifting through intercompany pricing, excessive debt, or low-tax intermediaries face pressure from multiple directions simultaneously. Each provision reinforces the others.

Audit Risk and Enforcement Under the NRS

The NRS inherits and expands the enforcement posture of the former FIRS International Tax Department. Transfer pricing audits have been increasingly aggressive in recent years, and the NTA 2025 gives the NRS sharper tools:

• Extended audit periods. The standard limitation period for tax audits is six years under Section 36(1) of the NTAA. However, Section 36(2) permits the NRS to continue an audit — and raise additional assessments — for years beyond the six-year limit if the audit was initiated before the limitation period expired. Section 36(4) allows the NRS to go beyond six years entirely where there is a deliberate misstatement.
• Artificial transaction powers. Under Section 46 of the NTAA, the NRS can disregard or adjust any transaction it considers artificial, fictitious, or not at arm’s length. Where such a transaction is identified, the NRS may issue a revised assessment to recover the tax benefit, plus interest and penalties.
• Digital cross-referencing. The NRS is equipped with tools to cross-reference data across bank accounts, payroll systems, and business filings. Intercompany payments that do not match declared transfer pricing policies are easier to spot than ever.
• Compound interest on tax debts. The NTA prescribes compound interest for unpaid tax, applied retrospectively to any amount that remains outstanding.

The burden of proof in a transfer pricing dispute rests on the taxpayer. You must demonstrate that your intercompany pricing is consistent with the arm’s length principle, supported by contemporaneous documentation and reliable comparables.

Common Transfer Pricing Mistakes Under the New Regime

• Treating TP documentation as a once-and-done exercise. Documentation must be updated annually. The NTA 2025’s broader definitions and new provisions (CFC, ETR, expanded PE) mean last year’s documentation may no longer capture your full risk profile.
• Ignoring the EBITDA cap when pricing intercompany debt. An arm’s length interest rate is necessary but not sufficient. If total interest exceeds 30% of EBITDA, the excess is non-deductible regardless of whether the rate itself is defensible.
• Assuming offshore service hubs are outside Nigerian reach. The expanded PE rules, CFC provisions, and mandatory disclosure requirements collectively mean that offshore structures must have genuine economic substance — not just a legal presence — to withstand scrutiny.
• Relying exclusively on foreign comparables without adjustment. The Transfer Pricing Regulations allow non-Nigerian benchmark data, but the NRS expects appropriate adjustments for economic differences. Using unadjusted European or Asian comparables for a Nigerian operation is a common audit trigger.
• Failing to disclose aggressive arrangements. The mandatory disclosure requirement under the NTAA carries its own penalties. Not disclosing an arrangement that later proves non-compliant compounds the exposure.
• Neglecting the interaction between CFC and TP rules. A transfer pricing structure that shifts profits to a controlled foreign entity now faces scrutiny on two fronts: the arm’s length test and the CFC deemed distribution. Both must be modelled together.

Steps Multinationals Should Take Now

1. Conduct a transfer pricing health check. Map all intercompany transactions touching Nigeria against the NTA 2025 provisions. Identify where current pricing, documentation, or structures create exposure under the new CFC, ETR, or expanded PE rules.
2. Reassess intercompany financing. Model the 30% EBITDA cap against your current and projected debt levels. If interest deductions are at risk, consider restructuring the debt-to-equity mix or re-routing financing through exempt entities (banking or insurance subsidiaries).
3. Update documentation annually. Ensure your Master File, Local File, and CbCR (where required) reflect the current year’s transactions, methods, and comparables. The documentation must be available before the tax return filing deadline.
4. Review offshore structures for substance. Any entity in the group that serves as a management fee recipient, licensing hub, or financing vehicle should have demonstrable substance — real employees, real decision-making, and real economic activity. Shell entities with no substance are the first targets under both the TP and CFC rules.
5. Consider an Advance Pricing Agreement. For large, recurring intercompany transactions, an APA provides certainty and reduces audit risk. The process is new in Nigeria, so early movers may benefit from a cooperative NRS posture.
6. Engage local transfer pricing specialists. The NTA 2025 introduced provisions that interact in complex ways. A qualified Nigerian TP adviser can help you navigate the overlap between CFC rules, ETR requirements, TP documentation, and the new disclosure obligations. Browse our Tax Professional Directory to find experienced professionals.

For quick questions about how specific provisions apply to your situation, try our AI Tax Assistant — it covers the NTA 2025 provisions in plain language.

Final Thoughts

The Nigeria Tax Act 2025 fundamentally raises the bar for transfer pricing compliance. The introduction of CFC rules, the 15% minimum ETR, the expanded PE definition, and the mandatory disclosure of tax planning arrangements represent a coordinated effort to close the gaps that multinationals have historically used to minimise Nigerian tax exposure. These provisions do not operate in isolation — they reinforce each other, making it significantly harder to sustain structures built around intercompany pricing without genuine economic substance.

The practical message is clear: reactive compliance is no longer viable. Multinationals operating in Nigeria need to proactively review their transfer pricing policies, documentation, and group structures against the full NTA 2025 framework. The cost of getting it wrong — compound interest, penalties, and extended audit exposure — far exceeds the cost of getting it right.

Start with a transfer pricing health check, update your documentation, and engage qualified professionals who understand the Nigerian landscape. Our Tax Professional Directory lists experienced transfer pricing and international tax specialists across Nigeria. For a broader understanding of Nigerian tax obligations, explore our calculators or test your knowledge with our Tax Quiz.

FAQs About Transfer Pricing Under the NTA 2025

Do the 2018 Transfer Pricing Regulations still apply?

Yes. The Income Tax (Transfer Pricing) Regulations 2018 remain the operative procedural framework for transfer pricing in Nigeria. They govern documentation requirements, acceptable methods, comparability analysis, and penalty provisions. The NTA 2025 supplements these regulations with broader substantive provisions on CFC rules, interest deductibility, PE definitions, and mandatory disclosure.

What is the penalty for non-compliance with transfer pricing rules?

The NRS can adjust your taxable profits upwards and issue additional assessments with compound interest on unpaid tax. Penalties also apply for failure to maintain documentation, late filing of TP Declaration Forms, and non-disclosure of tax planning arrangements. The extended audit provisions under the NTAA mean these assessments can cover periods beyond the standard six-year limitation.

How do the CFC rules affect holding structures?

If a Nigerian company controls a foreign subsidiary and that subsidiary does not distribute its profits within one year, those profits are deemed distributed and taxed in Nigeria. This effectively eliminates the deferral advantage of holding profits in low-tax jurisdictions. Multinational groups with Nigerian parent companies should model the CFC tax impact on all foreign subsidiaries.

Does the 30% EBITDA interest cap apply to local loans?

Yes. Under the NTA 2025, the 30% EBITDA cap on interest deductibility now applies to debt from both foreign and local connected persons. Previously, it was limited to foreign-party debt. Banking and insurance subsidiaries of foreign companies are exempt from this restriction.

What transactions must be disclosed under the new mandatory disclosure rules?

Any arrangement whose principal purpose is to obtain a tax advantage must be disclosed to the relevant tax authority within 30 days. This includes structures that shift income inconsistently with economic substance, non-arm’s length dealings between related parties, and arrangements that convert taxable income into non-taxable income. Routine commercial transactions with genuine substance and transactions compliant with arm’s length standards are excluded.

Can multinationals use an Advance Pricing Agreement to reduce risk?

Yes. The NRS introduced formal APA guidelines from 1 January 2025. APAs can be agreed for up to three years and can be unilateral, bilateral, or multilateral. They offer certainty on transfer pricing methodology for specified transactions and reduce audit risk. The process requires a pre-filing conference, application, and negotiation with the NRS.

How has the definition of permanent establishment changed?

The NTA 2025 broadens PE to include project-based activities (construction, installation, even if fragmented or partially offshore), and service-based presence through employees, agents, or subcontractors operating in Nigeria. The focus is on economic substance rather than legal form. Non-resident companies that previously avoided PE through fragmented or short-term arrangements should reassess their Nigerian tax exposure.