Ican 2023 Advanced Taxation Question 3

Transfer pricing has become a topical fiscal policy issue globally due to the need by various governments to prevent tax evasion and avoidance of economic double taxation. Developing countries, especially, are therefore encouraged to develop appropriate transfer pricing regulations that will seek to protect their tax bases and raise revenue without jeopardising investors’ interest. NADA Incorporated, Canada, is a multinational enterprise with head office in Quebec, Canada. The company, which was established more than three decades ago, has interests in oil and gas; textile; and telecommunication sectors in several countries in America, Europe and Asia, Rwandan and Kenyan companies took advantage of the successful commencement of the African Continental Free Trade Area agreement (ACFTA) through sales to the West African market in the third quarter of 2022. Based on the foregoing, NADA Incorporated plans to establish its presence in the Nigerian business environment. While deliberating on the feasibility of the proposed establishment of a textile company in the northern part of the country, the issue of transfer pricing regulations and practices were noted by the board of directors. The Nigerian Income Tax (Transfer Pricing) Regulations 2018 was accessed via a trusted online medium, read and analysed. However, the aspect of transfer pricing documentation and arm’s length comparability factors were not clear to the directors. You have been engaged by one of the promoters of NADA Incorporated in Nigeria (PROMOT Link) as the company’s Tax Consultant to help provide professional advice on the “grey areas” of interest.