Intangibles and Transfer Pricing Regulation in Nigeria: An Exposition

Intangibles play an important role in the processes of many business enterprises. They facilitate value creation and enhance the profitability of businesses that deploy them. They are also valuable assets that can be traded in themselves, although their appropriate values are often difficult to ascertain. As such, studies show that transactions in intangibles also provide opportunities for profit shifting by multinational enterprises through transfer (mis)pricing; a situation that deprives source states of due and sometimes significant tax revenue. This situation has over time triggered both unilateral and concerted responses by states anxious to cauterize this conduit of revenue bleeding. Through analysis of relevant legislation, case law, policy documents and opinions, this paper examines the recent measures applied by Nigeria to regulate the transfer pricing of intangibles, evaluating the legal and administrative challenges confronting Nigeria as a developing country seeking to enforce the complex arm’s length principle of transfer pricing. Because the subject is of global character, the author relies on both Nigerian and foreign sources, including various OECD/UN initiatives.