Nigeria embraced the Country-by-Country Multilateral Competent Authority Agreement (CbC MCAA) on January 27, 2016, paving the way for the introduction of the Income Tax (Country-By-Country Reporting) Regulations in 2018. This regulatory framework serves as a crucial administrative tool for Country-By-Country (CBC) reporting in Nigeria, aligning with the OECD’s Base Erosion and Profit Shifting (BEPS) Action 13.
Key Points:
- Global Standards and Implementation: Nigeria adopted the CbC MCAA, aligning with OECD’s BEPS Action 13 for multinational enterprises (MNEs) to annually report their financial data across various tax jurisdictions.
- CBC Report Overview: MNEs’ CBC reports include aggregate data on global information such as revenue, profit or loss, income tax paid, income tax accrued, capital, accumulated earnings, number of employees, and assets in each jurisdiction where the MNE Group operates.
- Effective Date and Highlights: Nigeria’s Income Tax (Country-By-Country Reporting) Regulations became effective on January 1, 2018. Highlights include filing requirements for Ultimate Parent Entities, Resident Constituent Entities, and notification obligations to the Federal Inland Revenue Service (FIRS).
- Filing and Notification Requirements: Notification of relationship with the MNE Group is required by resident constituent entities, specifying their role. FIRS notification should occur by the last day of the Reporting Accounting Year, with penalties for non-compliance.
- Contents of Filing: Filing must include identification of each Constituent Entity and financial disclosure for each jurisdiction where the MNE operates.
- Prescribed Forms and Due Dates: The filing must use the prescribed form as per the First Schedule to Income Tax (Country-By-Country Reporting) Regulations of 2018, with FIRS having the authority to modify it. The due date for filing is not later than 12 months after the last day of the Reporting Accounting Year.
- Penalties for Non-Compliance: Non or late filing incurs administrative penalties. Declaration of false information in returns attracts a significant penalty.
- Exclusion Criteria: MNEs with total consolidated group revenue of less than N160,000,000,000.00 during the preceding Accounting Year are excluded from filing.
- Utilization and Purpose: The CBC report aids in high-level transfer pricing and BEPs risk assessment, enhancing tax transparency and combating tax evasion or avoidance.
- Suspension Notice: In May 2021, FIRS issued a notice suspending Regulation 4 of the 2018 CbC reporting regulations, exempting branches and subsidiaries of MNEs from submitting CbC reports when there is no automatic exchange of information mechanism.
Understanding and compliance with these regulations are crucial for MNEs operating in Nigeria, ensuring transparency and adherence to international standards.
For professional advice on Accountancy, Transfer Pricing, Tax, Assurance, Outsourcing, online accounting support, Company Registration, and CAC matters, please contact Inner Konsult Ltd at www.innerkonsult.com at Lagos, Ogun state Nigeria offices, www.sunmoladavid.com. You can also reach us via WhatsApp at +2348038460036.
