Federal Inland Revenue Service (FIRS), on 21 February 2019, issued guidelines setting out steps that taxpayers must follow for initiating Mutual Agreement Procedure (MAP).
MAP is a dispute resolution mechanism (set out in Tax Treaties enforceable in Nigeria) through which a Nigerian taxpayer may request a Competent Authority (the Minister of Finance or his authorised representative) in Nigeria to engage Competent Authorities (CAs) of other countries with whom Nigeria has Tax Treaties (Treaty Partners), to seek mutual resolution of tax issues affecting such taxpayer.
The request for MAP is triggered where the taxpayer is of the view that actions of either or both tax authorities may result in tax implications that are not contemplated in the Tax Treaty. A taxpayer may also rely on MAP to prevent double taxation arising from additional tax imposed by the tax authority of a Treaty Partner due to transfer pricing adjustment.
Highlights of the procedure/requirements for initiating MAP are set out below:
- A pre-filing consultation with the Nigerian CA
- Submission of a formal MAP request if the CA is satisfied that the case merits MAP
- Case presentation to the CA before the deadline specified in relevant treaties, which is typically within a maximum period of three (3) years from the first notification of action that resulted in taxation not in accordance with provisions of the Tax Convention.
- Written request addressed to the Executive Chairman of FIRS (the Delegated CA in Nigeria), setting out the prescribed information.
Please note that taxpayers are not required to participate in MAP negotiations between the Nigerian CA and the CAs of the Treaty Partners but are required to present their views and provide assistance in fact-finding.
The release of these MAP guidelines is very laudable as it marks the first time clear guidance is provided on the procedure for initiating MAP in the over forty (40) years Nigeria has been participating in international tax treaty system. It is further proof of Nigeria’s efforts towards aligning its domestic tax system and administration with global best practices.