AI agents for business finance: what they can and can't do
What AI agents can do in bookkeeping, close, collections and compliance today, where a person must stay in charge, and how to judge a product.
The short answer
Both countries require dealings between an Italian parent and its Nigerian subsidiary to be priced as if the two were independent: Italy under art. 110 paragraph 7 TUIR, Nigeria under its Transfer Pricing Regulations. In Nigeria, connected parties with controlled transactions below ₦300 million are exempt from contemporaneous documentation but must still price at arm's length, and penalties for missing declarations and documents run to millions of naira. Because the Italy treaty covers only air and shipping, there is no treaty route to remove double taxation if the two authorities disagree.
What counts as a controlled transaction
Any dealing between the Italian company and its Nigerian unit is a controlled transaction: the parent charging management fees, the subsidiary providing software development or customer support to the parent, sales of goods between them, intercompany loans and interest, and royalties for the brand or technology. Each needs a price, and each price needs a reason.
The Italian rule
Article 110 paragraph 7 TUIR (Brocardi, updated 26 September 2026) says income from transactions with non-resident related companies is determined by reference to the conditions and prices that would have been agreed between independent parties acting at arm's length in comparable circumstances, where this increases income, and that the method can be set on the basis of best international practice. Ask your adviser which international guidance they apply, and ask about Italian documentation and how it can protect against penalties.
The Nigerian rules
Nigeria's Income Tax (Transfer Pricing) Regulations took effect on 12 March 2018, according to KPMG Nigeria. Key points from KPMG and Grant Thornton (January 2025):
- Methods: comparable uncontrolled price, resale price, cost plus, transactional net margin and profit split.
- Threshold: connected persons whose controlled transactions total less than ₦300 million are exempt from contemporaneous documentation, but must produce it within 90 days if asked.
- Filing: a transfer pricing declaration and disclosure go in with the company income tax return; documentation must be in place by the return due date and produced within 21 days of a request.
- Intangibles: the deduction for the use of rights in intangibles is capped at 5% of the relevant earnings before interest, tax, depreciation and amortisation (EBITDA), per KPMG.
- Penalties include the higher of ₦10 million or 1% of controlled transactions for missing documentation, plus ₦10,000 a day, per KPMG. Grant Thornton gives a different figure for late declarations (₦25,000 a day), so confirm current amounts.
These regulations were made under the old tax law. Whether they have been reissued under the Nigeria Tax Act 2025 is something we could not confirm; ask a Nigerian adviser.
Why the treaty gap matters
The FIRS circular on treaty claims (2022/15) lists Nigeria's treaty with Italy as covering air and shipping only. Where a full treaty exists, a company facing an adjustment in one country can ask the other to make a matching adjustment through the mutual agreement procedure. With Italy there is no such route for ordinary business profits. If Nigeria decides your subsidiary should earn more, and Italy does not accept that the parent should earn less, the same profit can be taxed twice. Good pricing and documentation in both countries is the main protection. See the treaty question.
Worked example: a cost-plus service fee (illustrative)
A Nigerian subsidiary runs software testing for its Italian parent. Its annual costs are the equivalent of €100,000. A benchmarking study (example) shows independent service providers earn a mark-up of 8% on costs.
| Item | Amount (example) |
|---|---|
| Subsidiary costs | €100,000 |
| Mark-up at 8% | €8,000 |
| Arm's-length service fee | €108,000 |
| Subsidiary profit taxed in Nigeria | €8,000 |
If the parent paid only €100,000, Nigeria could argue the subsidiary earned nothing and adjust. If it paid €140,000, Italy could argue the parent's costs were inflated. Write the method into an intercompany agreement and invoice monthly or quarterly.
Loans and recharges: the easily missed flows
Founders often start a Nigerian unit by sending money from the Italian company as needed, and paying some costs directly from Italy. Both are controlled transactions. A transfer to fund the subsidiary should be documented as either share capital or a loan; if a loan, set an interest rate that an independent lender would charge and a repayment schedule. Costs the parent pays on the subsidiary's behalf, such as software licences or travel, should be recharged on an invoice, with or without a mark-up depending on whether the parent adds value. Undocumented flows like these are an easy target in a transfer pricing review.
Keep in mind that the subsidiary's Nigerian accounts and the parent's Italian accounts must tell the same story: the fee one books as income, the other books as a cost, for the same amount and period.
Steps to put in place
- Map every intercompany flow: services, goods, loans, royalties, recharges.
- Sign intercompany agreements that state the method and the price.
- Get a benchmark for the mark-up or price, and update it periodically.
- In Nigeria, file the declaration and disclosure with the tax return and keep documentation ready.
- Record intercompany invoices in both sets of books at the transaction-date rate: see euro and naira bookkeeping.
Where Pryme fits
Intercompany payments from a Pryme Business Account leave a clear, dated trail matched to each invoice, and invoicing keeps the intercompany invoices in one place. The Compliance agent can prepare a filing calendar for a person to approve.
Questions people ask
Does transfer pricing apply to a small Nigerian subsidiary?
Arm's-length pricing always applies; below ₦300 million of controlled transactions, Nigeria exempts you from contemporaneous documentation but can ask for it within 90 days.
What is the Italian transfer pricing rule?
Art. 110 paragraph 7 TUIR: prices with non-resident related companies are set as between independent parties in comparable circumstances.
Is there a treaty to fix double taxation between Italy and Nigeria?
The FIRS circular lists the Italy treaty as covering air and shipping only, so there is no mutual agreement procedure for ordinary business profits.
What are Nigeria's transfer pricing penalties?
Published summaries differ; KPMG lists the higher of ₦10 million or 1% for missing documentation plus ₦10,000 a day. Confirm current amounts.
Sources
- Brocardi: Art. 110 TUIR (DPR 917/1986), updated 26 Sep 2026 · accessed Oct 2026
- KPMG Nigeria: Newsletter on Nigeria's revised Transfer Pricing Regulations (2018) · accessed Oct 2026
- Grant Thornton: Transfer pricing, Nigeria (1 Jan 2025) · accessed Oct 2026
- FIRS Information Circular 2022/15 on claiming tax treaty benefits in Nigeria (11 May 2022, hosted by KPMG) · accessed Oct 2026
This article is general information, not financial, legal or tax advice. Products described are provided under the terms on this site and are subject to regulation and eligibility.