“On 27 January 2016, the elders of Nigeria and of thirty other countries gathered at a square-table, majorly to mull over the three Base Erosion and Profit Shifting (BEPS) Pillars of the Organization for Economic Co-operation and Development (OECD).

Of the three – Transparency, Coherence and Substance, Transparency was the fairest of them all and in her honour, it was thus agreed that that Multinational Enterprises (MNEs) operating in the 31 countries would forthwith live in glasshouses.

The glasshouse theory simply means that the MNEs in each country would be Transparent in their affairs and would thus keep all relevant high-level financial and economic data about themselves and their dealings with related parties. This information would also be discloseable and exchangeable with Relevant Tax Authorities (RTA) of all 31 countries. This agreement – the Multilateral Competent Authority Agreement (MCAA), was signed by all the elders and sealed with an adage – He who lives in a glasshouse does not throw stones, so also, MNEs who live in glasshouses will not evade taxes.”

  • Enny Money, 12/09/2018, 11:59pm.


The glasshouse theory is what we refer to as Country by Country Reporting (CbCR). In reverence to the decision of the elders, the FIRS, in accordance with the powers vested on it by Section 61 of the Federal Inland Revenue Service Establishment Act 2007 (FIRSEA), enacted the Income Tax (Country by Country Reporting) Regulations (the Regulations), with an effective date of 1 January 2018.

The effective date of the Regulations simply means that the obligation to file the CbCR starts from that date so qualifying MNE Groups with financial periods from 1 January 2018 to 31 December 2018 would be required to file a CbCR this year.

The Regulations give effect to the MCAA, the Income Tax (Transfer Pricing) Regulations, the Federal Inland Revenue Service (Establishment) Act, the Companies Income Tax Act and the Petroleum Profit Tax Act.



He who lives in a glasshouse is covered, but exposed”.

  • The Elders.

CbCR, according to the Regulations, must include income, expenditure, loss, profits, accumulated earnings, tangible assets, organizational information and the main business activities of the constituent entities (CE) of each MNE Group.

The resulting effects of a CbCR is that our FIRS gains access to detailed financial information covering the activities of the MNE Group worldwide, meaning Transfer Pricing (TP) risks can be assessed, and tax audit resources duly allocated.

Knowledge is power and the glasshouse theory holds the MNE groups to ransom, as overarching knowledge about their activities is in the hands of the authorities. This is an era of Exposure!



The condition that qualifies MNE Groups in Nigeria to annually prepare and file CbCR with the FIRS is where the Group makes a consolidated turnover of at least 160 billion naira. The CbCR is to be submitted to the FIRS by the relevant entity of the MNE Group.

Life is Eazi Group Ltd which manufactures cars that run on water, is headquartered in Nigeria, with constituent entities in Malaysia, Singapore, USA and Rome. The consolidated turnover of the Group is 340 billion naira and the financial year of the group is from 1 January – 31 December. The Nigerian branch of Life is Eazi group is confused as to which entity in the Group is to prepare and file its CbCR with FIRS i.e. the ‘Reporting Entity’. It thereby procured the services of Enny Money.

Enny Money tells the CEO of Life is Eazi that in accordance with Nigerian Law (The Regulations), there are three types of entities that can be the relevant entities for the purpose of preparing and filing CbCR with FIRS. They are Ultimate Parent Entities (UPE), Constituent Entities (CE) and Surrogate Parent Entities (SPE). All are entities (aka branches) within a Group but with different obligations according to circumstances.

The UPE is the primary entity required to file CbCR where it is tax resident in Nigeria, but the UPE is not always tax resident in Nigeria. Where this is the case, the CE that is tax resident in Nigeria is inherently required to file the CbCR. The SPE is appointed by the UPE to substitute the UPE in its obligation of filing the CbCR with FIRS on behalf of the Group. Where the UPE so appoints the SPE, the CE will be exempted from its automatic obligation to file the CbCR.


Being tax-resident in Nigeria and the UPE of the MNE Group, the headquarters of Life is Eazi in Nigeria is the entity required to file the CbCR with the FIRS. To qualify as the UPE for the group, Life is Eazi (Nigeria) owns either directly or indirectly, a sufficient interest in one or more of the other branches in Malaysia, Singapore, USA and Rome. This interest is so substantial that Life is Eazi (Nigeria) is required to prepare consolidated financial statements for the Group in accordance with Nigerian law. Being the UPE can also mean that Life is Eazi (Nigeria) will be required to prepare the consolidated financial statements if its equity interests were traded on the Nigerian Stock Exchange.

If Life is Eazi (Singapore) became the UPE, since it is not tax-resident in Nigeria, Life is Eazi (Nigeria) would have the automatic obligation to file the CbCR with the FIRS if: Life is Eazi (Singapore) is not obligated to file a CbCR in Singapore or Singapore does not have an agreement like the MCAA which the elders of Nigeria also agreed upon or there is a systemic failure of Life is Eazi (Singapore) to file the CbCR with the FIRS.

If Life is Eazi (Singapore) as UPE appointed Life is Eazi (Malaysia) as SPE to file the CbCR on its behalf, Life is Eazi (Nigeria) will be exempted from its inherent obligation to file the CbCR.

This exemption will only occur where Malaysia requires filing of CbCR in a manner that conforms with the requirements of the Regulations; and Malaysia has a Qualifying Competent Authority Agreement (QCAA) in effect to which Nigeria is a party as at when filing is due; and Malaysia has not notified the FIRS of a systemic failure; and Malaysia has been notified in accordance with the Regulations by Life is Eazi (Malaysia) that it is the SPE for Life is Eazi Group; and a notification of the surrogate status has been sent to the FIRS in accordance with the Regulations.

The FIRS on 3 July, 2018 released Guidelines for Country by Country Reporting in Nigeria. The Guidelines contain specific instructions on how the Reporting Entity will complete the template for CbCR and a form for the CE tax-resident in Nigeria to notify the FIRS of the details of the Reporting entity e.g notification of the surrogate status mentioned above.



The FIRS has made it clear that it is not smiling in this new era of exposure. MNE Groups that regardless fail to embrace Transparency the fair maiden – in disregard of the decision of the Elders – will be forced to drink from the vile calabash of the penal teas.

  • Late Filing of the CbCR attracts a penalty of ₦10 million in the first instance and ₦1 million for every month in which the default continues.
  • Filing of an incorrect or false CbCR by a Reporting Entity attracts a penalty of ₦10 million.
  • Non-compliance by the CE tax-resident in Nigeria to the requirement to file notifications with the FIRS attracts an administrative penalty of N5 million in the first instance and N10,000 for every day the default continues.
  • Failure of the CE of an MNE Group which is tax-resident in Nigeria to notify the FIRS of the identity and tax residence of the Reporting Entity attracts a penalty of ₦5 million in the first instance and ₦10,000 for every day of default.

Enny Money is certain that life is easy for Life is Eazi Group Ltd and has advised that they comply timeously and correctly, so no worries there about offending the Elders!



“One does not sleep when there is fire on the roof of the glasshouse”.

  • The MNE Groups.

Life is Eazi Group Ltd needs Assurance. The FIRS and RTA in other Malaysia, Singapore, Rome and the USA will have all their particulars.  How will this critical information be protected adequately? They know that this is Nigeria. Will there also be adjustments made to their information by the RTA? The MNE Groups are losing sleep over this problem. There seems to be fire, not on the mountain, but on the roof of their newly constructed glasshouse.

Enny Money says that by Nigerian Law, the FIRS is to use the CbCR for assessing high-level transfer pricing risks, other base erosion profit shifting (BEPS) risks in Nigeria and the risk of non-compliance of CE of the MNEs with applicable TP rules and economic and statistical data analysis.

The FIRS cannot however use CbCR filings as a basis for making transfer pricing adjustments. The FIRS is also to preserve confidentiality of the information contained in the CbCR at least to the extent that it would do so if the information was provided under the Multilateral Convention on Mutual Administrative Assistance in Tax Matters.

On 3rd July 2018, the FIRS also published Guidelines for the Appropriate Use of Information Contained in CbC Reports which states that information contained in CbCR will only be used for high level TP assessment, for assessing BEPS related risks and for performing economic and statistical analysis.

Where CbCR is used as a substitute for detailed TP analysis, as conclusive evidence that transfer prices are not arm’s length or as a basis for proposing TP adjustments, this will be inappropriate use of CbCR and consequences like temporary suspension of exchange of CbC Reports among others, will follow.



“One must not wait for rain to fall, before running for shelter”.

  • Enny Money.

Enny Money’s final words for the troubled CEO of Life is Eazi Group Ltd is that MNEs including Life is Eazi should not be reactive but must be proactive in conducting a strategic re-ordering of their TP documentation and policies. Life is Eazi (Nigeria) in light of the increased compliance standards must not rest on its oars and must promptly determine who to file the CbCR and give notifications to the FIRS.

Enny Money does not need two eyes to also tell that there will be an increase in TP audits and litigious disputes as the stiff penalties and confidentiality/adjustment concerns will be put in issue. Life is Eazi Ltd should also consult qualified tax advisers (like Enny Money will soon be) to evaluate their TP and all necessary documentation and practices to lessen their TP risk level, carry out a holistic BEPS risk-assessment and regularize their status as soon as possible.

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