First transfer pricing judgment in Nigeria – Prime Plastichem Nigeria Ltd v Federal Inland Revenue Service

On 19 February 2020, the first judgment on transfer pricing in Nigeria was delivered by the Tax Appeal Tribunal (Tribunal) in the case of Prime Plastichem Nigeria Ltd (Prime Plastichem) v Federal Inland Revenue Service (FIRS). The tax appeal was instituted by Prime Plastichem pursuant to Nigeria’s Income Tax (Transfer Pricing) Regulations No 1, 2012 (TP Regulations). Prime Plastichem challenged the FIRS’ imposition of additional income tax assessments on a transaction between Prime Plastichem and a related company. The additional assessments arose from the transfer pricing adjustments made by the FIRS. In these assessments, the FIRS applied a Profit Level Indicator (PLI), different from that applied by Prime Plastichem, as the appropriate method for the determination of the arm’s length price applicable to the transaction in the relevant financial years. In its judgment, the Tribunal upheld the FIRS’ assessment and dismissed the appeal of Prime Plastichem in its entirety.