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
Charges between related South African and Nigerian companies must be priced at arm's length in both countries. SARS requires detailed transfer pricing records once aggregate related-party transactions exceed R100 million a year, and Nigeria requires a declaration and disclosure with the company tax return, with documentation ready by the filing date unless transactions are below ₦300 million. Nigerian documentation penalties start at the higher of ₦10 million or 1%.
The principle
When a South African company and a Nigerian company are under common control, every charge between them, whether for goods, services, management, software, royalties or loans, must be priced as unrelated parties would price it. Both countries apply that arm's length rule, and the tax treaty between them backs it up: Article 9 of the South Africa–Nigeria agreement lets either country adjust profits where associated enterprises set conditions that differ from those between independent enterprises, and lets the other make a corresponding adjustment, with the tax authorities consulting where needed.
South Africa: what SARS expects
SARS Public Notice 1334 of 28 October 2016, issued under section 29 of the Tax Administration Act, sets out the transfer pricing records required for years of assessment starting on or after 1 October 2016.
| Trigger | Records |
|---|---|
| Aggregate potentially affected transactions for the year exceed, or are expected to exceed, R100 million (no offsetting) | Detailed records under the notice |
| Within that, each transaction over R5 million | Full transaction-level records (paragraph 4) |
| Transactions under R5 million | Records sufficient to show SARS the transaction is at arm's length (paragraph 5) |
The required records include the group's ownership structure and foreign connected persons with their tax residence; a summary of the business, market, management and supply chain role; and for each transaction its terms and contracts, the tested party and why it was chosen, a functional and risk analysis, intangibles, comparables and the method used, assumptions and price adjustments, and funding detail for loans over twelve months.
Below R100 million the detailed notice does not bite, but the arm's length rule still does. A small group should still be able to explain how it set each price.
Nigeria: declaration, disclosure, documentation
Nigeria's Income Tax (Transfer Pricing) Regulations commenced on 12 March 2018. According to Grant Thornton (January 2025) and KPMG (2018):
- A transfer pricing declaration and disclosure form are filed with the company income tax return, which is due six months after year end.
- Documentation must be in place by the return due date and produced within 21 days of a request.
- Connected persons whose controlled transactions are below ₦300 million are exempt from preparing contemporaneous documentation, but must produce it within 90 days if asked.
- Accepted methods include comparable uncontrolled price, resale price, cost plus, transactional net margin and profit split.
- Deductions for the use of rights in intangibles are capped at 5% of earnings before interest, tax, depreciation and amortisation.
Penalties are steep. The documentation penalty is the higher of ₦10 million or 1% of the value of all controlled transactions, plus ₦10,000 a day, and the disclosure penalty is the higher of ₦10 million or 1%. The two sources give different figures for a late declaration, so check the current rule. Both refer to the Federal Inland Revenue Service, which has since become the Nigeria Revenue Service; whether the Nigeria Tax Act 2025 changed the regulations is not confirmed in the sources we checked.
The charges that cause most trouble
- Management fees from the South African parent: be ready to show what was done, by whom, and why the Nigerian company needed it. A cost-plus charge backed by timesheets is easier to defend than a percentage of revenue.
- Software and brand royalties: the 5% EBITDA cap in Nigeria limits the deduction; the treaty caps Nigerian withholding on royalties at 7.5%.
- Intra-group loans: interest rate, currency and terms need comparables; the treaty caps Nigerian withholding on interest at 7.5%.
- Shared staff: people who work for both companies need a clear recharge basis.
Technology and management agreements with a Nigerian company may also need registration with NOTAP: a 2019 Court of Appeal judgment summarised by KPMG held that an unregistered agreement is not void, but that the CBN and licensed banks may not make the payment abroad without a NOTAP certificate; see repatriating profits from a Nigerian subsidiary.
A worked example
Example only. A Johannesburg parent provides finance and HR support to its Lagos subsidiary. The cost of the staff time involved is R1,200,000 a year. Applying a 5% mark-up, a figure the group would need to support with comparables, the charge is R1,260,000. Documenting the cost base, the hours, the services delivered and the basis for the mark-up gives both SARS and the NRS the same story from each side.
What to check first
- List every flow between the two companies for the year.
- Total them against the R100 million SARS line and the ₦300 million Nigerian line.
- Put an intercompany agreement in place for each, before the charges start.
- Make sure the price in South Africa and the price in Nigeria are the same number, in the same currency.
- Information only; take advice from a transfer pricing specialist in both countries.
Where Pryme fits
A Pryme Business Account holds NGN, USD, GBP and EUR, so intercompany settlements can be made and recorded in the currency the agreement states. The Finance agent keeps invoices and payment records together, and VerifyDoc.ai verifiable receipts give an audit trail either tax authority can check (receipts).
Questions people ask
When does SARS require transfer pricing documentation?
Public Notice 1334 requires detailed records where aggregate potentially affected transactions exceed or are expected to exceed R100 million in a year, with full records for each transaction over R5 million.
Is there a small-company exemption in Nigeria?
Connected persons with controlled transactions under ₦300 million are exempt from contemporaneous documentation, but must produce it within 90 days if the tax authority asks.
Can my SA parent charge a management fee to the Nigerian subsidiary?
Yes, if it reflects real services at an arm's length price, is documented in an intercompany agreement and is supported by evidence of what was delivered.
What is the treaty withholding rate on royalties from Nigeria to South Africa?
Article 12 of the SA–Nigeria treaty caps it at 7.5%.
Sources
- SARS: Public Notice 1334, transfer pricing records under section 29 TAA (28 Oct 2016) · accessed Oct 2026
- SARS: Double taxation agreement, South Africa and Nigeria (GG 31241, in force 5 Jul 2008) · 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
- KPMG Nigeria: Court of Appeal judgment on agreements not registered with NOTAP (Aug 2019) · 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.