Nigeria signed the Country-by-Country Multilateral Competent Authority Agreement (CbC MCAA) on the 27th of January 2016 and thereafter introduced the Income Tax (Country-By-Country Reporting) Regulations in 2018 as an administrative framework for CBC reporting in Nigeria.
OECD formulated BEPS Action 13 ‘Transfer Pricing Documentation and Country-by-Country Reporting’ through public consultation, which provides a template for multinational enterprises (MNEs) to render their annual filing across different tax jurisdictions in which they do business.
Country-by-Country (CBC) report filed by MNEs generally contain aggregate data on the global information relating to the amount of revenue, profit or loss, income tax paid, income tax accrued, capital, accumulated earnings, number of employees, and assets of each jurisdiction in which the MNE Group operates.
Nigeria’s Income Tax (Country-By-Country Reporting) Regulations, 2018 became effective from the 1st of January 2018, and the following are the highlights of the regulation:
- Ultimate Parent Entity of an MNE Group that is resident in Nigeria are required to file Country-By-Country Reporting
- Resident Constituent Entity which is not the Ultimate Parent Entity of an MNE Group is also required to file Country-By-Country Reporting. This is provided that the Ultimate Parent Entity of the MNE Group; is not obligated to file a Country-by-Country Report in its jurisdiction of tax residence; has a current International Agreement to which Nigeria is a party; or there has been a Systemic Failure of the jurisdiction of tax residence of the Ultimate Parent Entity
- Each resident constituent entity of an MNE Group is required to notify the FIRS of its relationship with the MNE group. This is as regards whether it is an Ultimate Parent Entity, Surrogate Parent Entity, or which other Identity. FIRS should be notified no later than the last day of the Reporting Accounting Year of such MNE Group. Non-notification attracts N5,000,000.00 in the first month and N10,000.00 for every day in which the default to notify FIRS continues.
- Filing should contain: Identification of each Constituent Entity of the MNE Group; and disclosure of financial information regarding each jurisdiction in which the MNE operates
- Filing should be done in the prescribed form as contained in the First Schedule to Income Tax (Country-By-Country Reporting) Regulations of 2018. The form may however be modified by FIRS from time-to-time
- The due date for Country-by-Country Report filing is the day not later than 12 months after the last day of the Reporting Accounting Year of the MNE Group.
- Non or late filing attracts an administrative penalty of N10,000,000.00 in the first month and N1,000,000.00 for every month in which the default continues.
- Declaration of false information in the returns attracts an administrative penalty of N10,000,000.00.
- A Group MNE having total consolidated group revenue of less than N160,000,000,000.00 during the Accounting Year immediately preceding the Reporting Accounting Year as reflected in its Consolidated Financial Statements for such preceding Accounting Year is Excluded from filing.
The Country-By-Country report filed by MNEs is also used for high-level transfer pricing and BEPs risk assessment, which in turn improves tax transparency to prevent tax evasion or avoidance.
However, in May 2021, FIRS a notice suspending Regulation 4 of the 2018 country-by-country (CbC) reporting regulations which require branches and subsidiaries of MNEs operating in Nigeria to submit their CbC reports to the FIRS when there is no automatic exchange of information mechanism existing between Nigeria and the country of residence of the “ultimate parent entity“(UPE). MNE branches and subsidiaries are not required to submit the CbC reporting information to the FIRS.