Nigeria, Africa’s largest economy, has adopted various international tax transparency measures, including the OECD’s Base Erosion and Profit Shifting (BEPS) project. As part of its efforts to align with global tax standards, Nigeria implemented Country-by-Country Reporting (CbCR) under BEPS Action 13. This regulation aims to prevent tax avoidance by requiring multinational enterprises (MNEs) to disclose critical information about their global operations, revenue, taxes paid, and other financial data. This guide is designed to help Chief Financial Officers (CFOs) and financial executives understand the CbCR requirements in Nigeria and ensure compliance with the regulation.

Applicability of CbCR in Nigeria

Criteria for Reporting:

• CbCR applies to multinational enterprise groups with consolidated annual revenue of NGN 160 billion (approximately €750 million) or more in the preceding fiscal year.
• The CbCR obligation falls on the ultimate parent entity of an MNE group that is tax resident in Nigeria.
• A constituent entity in Nigeria of an MNE group whose parent entity is based in a country that does not require CbCR or does not exchange information with Nigeria may also be required to submit the report as a surrogate parent entity.

Relevant Legislation:

• CbCR was introduced into Nigerian law through the Income Tax (Country-by-Country Reporting) Regulations, 2018, under the Federal Inland Revenue Service (FIRS). These regulations align with the OECD BEPS Action 13 framework and outline the reporting obligations of MNEs in Nigeria.

Reporting Requirements

Information to be Reported:

• The CbC report must include comprehensive financial and operational information for each jurisdiction where the MNE group operates, including:
  • Total revenue (related-party and unrelated-party revenue)
  • Profit or loss before income tax
  • Income tax paid and accrued
  • Stated capital and accumulated earnings
  • Number of employees
  • Tangible assets (other than cash or cash equivalents)
• Additionally, the report must include details of all constituent entities within the group, along with their tax jurisdictions and primary business activities.

Form and Submission:

• The CbC report must be filed electronically using the prescribed XML format in line with the OECD’s standard template.
• Reports are submitted through the Federal Inland Revenue Service (FIRS) platform, which manages the submission and processing of CbCR data.
  • For more details on submission, visit the FIRS website.

Filing Deadlines

• The CbC report must be filed within 12 months after the end of the MNE group’s fiscal year. For instance, if the fiscal year ends on 31 December 2023, the report must be submitted by 31 December 2024.
• If the Nigerian entity is not the ultimate parent but is required to submit the report, notification must be given to FIRS by the last day of the reporting fiscal year.

Penalties for Non-Compliance

Penalties:

• Nigeria has strict penalties for non-compliance with CbCR requirements:
  • Failure to file the CbC report can result in fines starting at NGN 10 million (approximately €20,000), with an additional NGN 1 million penalty for each month of delay after the deadline.
  • Providing false or inaccurate information can attract further penalties, including NGN 10 million for incomplete or inaccurate submissions, and additional fines for continuing offences.

Defences:

• In cases of non-compliance, MNEs may argue reasonable cause for delays or errors in submission, such as technical difficulties or administrative misunderstandings. However, leniency is at the discretion of the Federal Inland Revenue Service (FIRS), and each case is reviewed individually.

Confidentiality and Use of Information

Data Protection:

• The CbC reports filed in Nigeria are treated with strict confidentiality. FIRS uses the information for high-level risk assessments to identify potential base erosion and profit shifting (BEPS) risks but does not use the data for tax assessments directly.
• Nigeria is a signatory to the Multilateral Competent Authority Agreement (MCAA), allowing for the exchange of CbCR data with other tax authorities globally. This ensures that reports are only shared with jurisdictions that adhere to the OECD’s data protection and confidentiality standards.