FIRS issues Guidelines on Mutual Agreement Procedure (MAP)

Businesses engaged in cross-border transactions must address the impact of their operations in another country. One of the vital issues is international tax, including double taxation and transfer pricing adjustment. This could lead to a tax dispute between a taxpayer and the tax authority in the home country and foreign country. The tax risk of doing business in a country may rise if there are several multinational companies and the country is yet to implement formal rules for settling international tax disputes. Recently, the Federal Inland Revenue Service (FIRS) issued formal rules for settling international tax disputes in its “Guidelines on Mutual Agreement Procedure in Nigeria”.  The guidelines apply to countries who have a tax treaty with Nigeria.

What is Mutual Agreement Procedure?

Mutual Agreement Procedure (“MAP”) is a dispute resolution process in which the competent authority in Nigeria and the foreign competent authority (“CA”) settle tax disputes affecting a taxpayer. The issues may be double taxation of a taxpayer and the interpretation and application of a specific Tax Treaty. Also, the Article on MAP in Nigeria’s tax treaties recognizes this reconciliation procedure. A MAP is often deliberated between two CAs. Nevertheless, the Nigerian CA may enter into a multilateral MAP comprising three or more CAs. 


Who is a Competent Authority and a Delegated Competent Authority?

Competent Authority (CA) means the Minister charged with the responsibility for Finance or his authorized representative. The Nigerian CA is expected to interact with CAs of Treaty Partners with the aim of resolving disputes in the interpretation or application of Tax Treaty provisions. A taxpayer may submit a case to the CA of either Contracting States, notwithstanding the arbitration procedures contained in the domestic law of the Contracting States. The Minister of Finance in Nigeria may assign an authorized representative with this task, that is, a Delegated Competent Authority.

In Nigeria, the Delegated Competent Authority is the Executive Chairman of Federal Inland Revenue Service (FIRS). FIRS is aware of the significance of tax certainty in a dynamic business environment and is committed to helping taxpayers in settling tax disputes in a systematic manner, and in line with international tax conventions. When a Nigerian tax resident taxpayer suffers double taxation due to adjustments made by either the Nigerian tax authorities or a foreign CA to the transfer prices of its related party transactions, it can resolve the double taxation through a MAP.



Who may apply for MAP?

MAP is available to:

• A taxpayer who is resident in Nigeria

• A taxpayer who is liable to tax only on the profit or income derived from Nigeria; subject to the specific tax treaty



When should a Nigerian taxpayer seek assistance from a CA?

A taxpayer should consult a CA on the following;

  • Transfer pricing (TP) adjustments: Adjustment to the value of goods or services transferred to or from the related party including cost allocation structure and financial arrangements.
  • Dual residence status: A taxpayer may be regarded as a tax resident in two treaty countries and liable to tax in the home and host countries.
  • Withholding tax: This is when taxes are withheld at a higher than the relevant tax treaty on amounts payable to a Nigerian resident.
  • Permanent establishment: A Nigerian resident taxpayer who is subject to tax in Nigeria on worldwide income, may be taxed on the business income earned in another treaty country.
  • Classification of income: Where a taxpayer in Nigeria has difficulty in classifying the income derived in another jurisdiction, a taxpayer may consult the CA in Nigeria.

What are the stages in MAP?

Ten (10) steps in MAP are presented below;

  1. A pre-filing consultation with the Nigerian CA
  2. Submission of a formal MAP request if the CA recognizes that the case meets the requirements for MAP
  3. Case presentation to the CA before the deadline specified in relevant treaties. The deadline is usually three (3) years from the first notification of the action that resulted in taxation, outside the provisions of the Tax Convention.
  4.  A written request to the Executive Chairman of FIRS containing the prescribed information.
  5. Review of the request
  6. Acceptance of the request
  7. Request for additional documents, if any
  8. Notification of request to the CA of the treaty partner
  9. Commencement of negotiations
  10. Implementation of a MAP decision



Taxpayers are not directly involved in MAP negotiations except for presenting views and assisting in the fact-finding. The Nigerian CA and the CA of Treaty Partners have an active role in the negotiation process. According to the OECD 2017 report on MAP, transfer pricing cases were closed in an average time of 30 months while non-transfer pricing cases were completed in an average time of 17 months. Taxpayers in Nigeria must therefore consider the duration for concluding a case, and other factors, before initiating MAP.


A copy of FIRS Guidelines on MAP is available here.