NIGERIA Law and Practice Contributed by: Theophilus Emuwa, Jibrin Dasun, Perpetua Onyeukwu and Tubosiya Ibama, ǼLEX
relief in an applicable DTT where the dividends are not brought into Nigeria through any commercial banks. 6.4 Taxation of Intangibles Developed by Local Corporations Intangibles developed by local corporations in Nigeria cannot be freely transferred or licensed to foreign sub - sidiaries without Nigerian tax consequences. Outright transfers may trigger CGT, while licensing arrange - ments attract WHT on royalties. Also, the NRS can rely on the general anti-avoidance provisions in the law to attribute a profit to the local corporation if it considers that the terms of the trans - fer of the intangibles do not reflect the arm’s length principle. 6.5 Controlled Foreign Corporation-Type Rules The NTA provides that where a foreign company, which is controlled by a Nigerian company, has not distributed its profits in a given year, the portion of those profits attributable to the Nigerian company (which could have been distributed without harming the business) will be deemed distributed and taxed in Nigeria. This introduces a Controlled Foreign Cor - poration (CFC) regime, effectively subjecting Nigerian companies to tax on retained foreign earnings of their subsidiaries. 6.6 The Substance of Non-Local Affiliates Rules related to the substance of non-local affiliates do not apply in Nigeria. 6.7 The Sale of Shares in Non-Local Affiliates Local corporations are taxed on gains on the sale of shares of non-local affiliates, whether or not the gains are received in, or brought into, Nigeria.
transaction artificial if they find that its terms have not been effected or, if it is a transaction between related parties, that its terms do not reflect the arm’s length principle. 8. Audit Cycles 8.1 Regular Routine Audit Cycle There is no fixed audit cycle; however, large corpo - rates are typically audited annually. 9. BEPS 9.1 Adoption of BEPS Recommendations In response to BEPS, Nigeria did not adopt the Two- Pillar solution introduced by the OECD. However, Nigeria has signed the following instruments: • the Multilateral Convention to Implement Tax Treaty-Related Measures to Prevent BEPS; • the Multilateral Competent Authority Agreement for the Common Reporting Standard; and • the Multilateral Competent Authority Agreement for the Automatic Exchange of Country-by-Country Reports. Despite Nigeria not adopting the Two-Pillar Solu - tion, the NTA introduces similar concepts through a minimum effective tax regime applicable to resident and non-resident companies that are either part of a multinational group with aggregate group turnover of at least EUR750 million (or its equivalent) or annual turnover of at least NGN50 billion. Under the NTA, where a company’s effective tax rate in Nigeria falls below 15%, additional tax is payable to bring the tax up to the prescribed minimum threshold. Also, where an NRC is a subsidiary of a Nigerian com - pany or a member of a multinational group of a Nige - rian company, and the income tax paid in its home country in any year is below the minimum effective tax rate of 15%, the Nigerian parent company is required to pay a top-up amount to bring the subsidiary’s tax up to the prescribed minimum effective tax rate.
7. Anti-Avoidance Provisions 7.1 Overarching Provisions
There is a general anti-avoidance provision in the NTA, which empowers the tax authorities to make necessary adjustments to counteract any tax reduc - tion that would result from transactions that are con - sidered artificial. The tax authorities may deem any
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