Year-End Tax and Transfer Pricing Compliance in Nigeria: Navigating Risks, True-ups, and Regulatory Scrutiny.

Introduction

Year-end tax compliance has assumed heightened significance for multinational enterprises (MNEs) operating in Nigeria, particularly in the context of increased enforcement activities by the Federal Inland Revenue Service (FIRS) and the transition into a new tax regime from January 2026. Year-end is no longer an accounting checkpoint but a critical compliance period for businesses in Nigeria

Notably, Year-End adjustments (YEA) is simply a correction made by a company at the end of its financial year to align the actual profits earned from transactions with related parties to the arm’s length range that independent companies would have achieved. The primary goal is to ensure that the terms and conditions of related transactions are consistent with those that would have been agreed upon by independent entities. These adjustments typically occur shortly before the books are closed, allowing taxpayers to reconcile actual financial performance with transfer pricing policies.

This article examines the key year-end tax and transfer pricing obligations in Nigeria, highlights compliance risks arising from misalignment with statutory requirements, and provides practical guidance on managing year-end adjustments, reporting obligations, and audit exposure.

I. Corporate Tax Rules

a. Capital Allowances

A key aspect of year-end corporate income tax compliance is the proper treatment of capital expenditure through the capital allowance regime, which provides relief by permitting qualifying capital expenditure to be offset against assessable profits.

Under the Nigeria Tax Act (“NTA”) 2025, which takes full effect from 1 January 2025, qualifying capital expenditure like all deductible expenses must satisfy the “wholly and exclusively incurred” test. Where this requirement is not met, the Federal Inland Revenue Service/Nigeria Revenue Service may disallow the expenditure, particularly where it is excessive, unrelated to income-generating activities, or insufficiently substantiated. This represents a notable departure from the position under the Companies Income Tax Act (“CITA”), which applied the WREN (Wholly, Reasonably, Exclusively and Necessarily) test.

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