Transfer Pricing is a technical subject that requires specialized knowledge. It goes to say that judges at the TAT should be well equipped in order to deliver sound judgment on Transfer Pricing and related matters. The UN Transfer Pricing Manual shows that TNMM may be more appropriate if the data on gross margin is less reliable due to accounting differences (i.e. the difference in the treatment of certain costs as cost of goods sold or operating expenses) between the tested party and the comparables for which adjustments are needed.

The case between Prime Plastichem Nigeria Limited (PPNL) and the Federal Inland Revenue Service (FIRS) held on 19 February 2020 is the first Transfer Pricing case in Nigeria since the inception of the Transfer Pricing Regulations.

PPNL is a private limited liability company whose business activity is the importation of plastics and petrochemicals.

PPNL purchased petrochemical products from its related party, Vinmar Overseas Limited (VOL), and consequently resold to its customers. PPNL applied the Comparable Uncontrolled Price Method (CUPM) and Transactional Net Margin Method (TNMM) in 2013 and 2014 respectively to assess the Arm’s Length nature of the transaction.   

As a result of its transactions with VOL, PPNL filed its Transfer Pricing Documentation (TPD) for the 2013 and 2014 financial years. PPNL applied the CUPM in 2013 to determine if its purchases from VOL were in line with the Arm’s Length Principle (ALP). Due to a lack of CUPM comparable to enable PPNL to use the method, it adopted the Transactional Net Margin Method (TNMM) in 2014 using the Operating Margin as the most appropriate Profit Level Indicator (PLI) for the transaction.


However, the FIRS disregarded the methods adopted in both years and raised an assessment of ₦1.74 billion after a perusal of the TPD filed by PPNL. Consequently, PPNL filed the case with the Tax Appeal Tribunal (TAT) and urged them to grant their claims and dismiss the defense of the FIRS.

The Tax Appeal Tribunal (TAT) delivered its ruling on the case and ratified the additional TP assessments including penalty plus interest in the sum of ₦1.74 billion raised by FIRS on the transaction between PPNL and VOL (its related supplier).

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Transfer Pricing Case

Transfer Pricing Case