- 20 Marks
ATAX – May 2023 – L3 – Q3 – Transfer Pricing
Explain transfer pricing compliance, declaration, and disclosure requirements along with arm's length comparability factors.
Question
Transfer pricing has become a topical fiscal policy issue globally due to the need for governments to prevent tax evasion and economic double taxation. Developing countries are encouraged to establish regulations to protect their tax bases while maintaining investor confidence.
NADA Incorporated, a multinational company headquartered in Quebec, Canada, plans to establish a textile company in northern Nigeria. While reviewing the Nigerian Income Tax (Transfer Pricing) Regulations 2018, the board of directors identified uncertainties around transfer pricing documentation and arm’s length comparability factors.
You are engaged as the company’s Tax Consultant to clarify these issues.
Required:
Send a report to the Managing Director of PROMOT Link, explaining:
(a) Transfer pricing compliance report (3 Marks)
(b) Transfer pricing declaration form to be submitted to the Federal Inland Revenue Service (FIRS) (6 Marks)
(c) Transfer pricing disclosure form to be submitted to the FIRS (6 Marks)
(d) Arm’s length comparability factors in transfer pricing (5 Marks)
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