Are Advanced Pricing Agreements Ushering in a New Dawn in Africa?

Over the years, transfer pricing has been a core area of focus for African countries, and multinational enterprises have an increased need to create certainty in the pricing of cross-border intragroup (controlled) transactions. After many years of deliberation, Nigeria and South Africa have introduced Advanced Pricing Arrangement programs. Although other countries on the continent (e.g., East African countries, such as Tanzania, Uganda, Rwanda, and Kenya) have also introduced APA programs, or at least offer the possibility thereof, under local laws, taxpayers have not been effectively utilizing these programs.

The application of APAs in Africa has been long awaited and constitutes a giant step forward in the world of transfer pricing. The provision of undoubted simplicity and certainty in cross-border transactions for MNEs cannot be overemphasized.

Tax certainty, pre-determined clarity, and risk mitigation offered by APAs have led Nigeria’s Federal Inland Revenue Service (FIRS) to issue Guidelines on APAs in November 2024 and South Africa to introduce an APA Program, enacted in the 2023 Taxation Laws Amendment Act, Act No. 18 of 2023.

APA Implementation in Nigeria

The FIRS Guidelines on APAs, which took effect on January 1, 2025, provide a detailed framework on APAs, delving into the types of APAs available. These include:

• Unilateral APAs signed by a taxpayer and the FIRS.
• Bilateral APAs that typically involve FIRS, a taxpayer in Nigeria, its connected person(s) that are resident in a foreign country, and the Competent Authority (CA) in that country; and
• Multilateral APAs, which cover connected persons and CAs in multiple jurisdictions.

Several key considerations and requirements were addressed in the guidelines, such as:

1. APA Application Threshold: MNEs must meet a minimum threshold in the value of their controlled transaction amounts to qualify for an APA application. Single transactions must be up to an equivalent of US$10 million for each covered controlled transaction for each year, while group transactions must meet the threshold of US$50 million.

2. APA Application Cost and Duration: An MNE with a taxable presence in Nigeria is required to pay a non-refundable APA application fee of US$20,000. A non-refundable deposit of US$5,000 also applies where such MNE chooses to renew existing APAs upon expiration. An MNE is responsible for all other costs incurred by the FIRS in excess of the non-refundable fee. In addition, the guidelines stipulate a maximum validity period of three years for the application of established APAs and provide that APAs may be rolled back for another maximum period of three years.

3. APA Requirements: An MNE must submit an Annual Compliance Report (ACR) to the FIRS compliance with the agreed APA terms and conditions may be demonstrated. The ACR is to be submitted along with the company’s annual income tax returns. Note that the ACR is an additional compliance document separate from the TP local file which MNEs are required to maintain as a separate compliance document in accordance with the Nigeria Income Tax Transfer Pricing Regulations (2018).

APA Implementation in South Africa

The introduction of APAs in the 2023 Taxation Laws Amendment Act, Act No. 18 of 2023 may be described as a step in the right direction for South Africa. Although the APA program is yet to take effect, there have been extensive deliberations on the relevant aspects and the process to be followed for the APA program, which, once effective, will include the following:

• APA pre-application by the taxpayer.
• Actual APA application by the taxpayer.
• APA processing by South African Revenue Service (SARS);
• APA negotiations between taxpayer and SARS as well as other party/ tax authority.
• APA finalization by SARS.
• APA implementation and monitoring.
• APA extension.
• APA amendment.
• APA termination; and
• APA withdrawal.

The above is regulated by the South African Income Tax Act. The program will take effect in the near future once a team of experienced specialists has been established within SARS and public notices are released on general rules for an APA, fees payable, and application requirements.

Furthermore, MNEs may, once implemented, be able to benefit from entering into a binding agreement on transfer pricing with SARS for up to five years. In terms of the types of APAs available, SARS has indicated that initially, only bilateral APAs with jurisdictions with an advanced level of APA experience will be entertained. However, applications for unilateral APAs may be considered at some stage.

MNEs in South Africa are eager to enjoy the tax clarity and certainty provided by an APA program, once it becomes operational at a date to be announced by the Minister of Finance in the Government Gazette.

APA Implementation in East Africa

With Nigeria and South Africa taking clear steps to formalize their APA frameworks, providing taxpayers with structured processes and defined expectations, the spotlight now turns to East Africa, where APA implementation is progressing at varying speeds.

Overall, East Africa is making progress, with Tanzania leading in terms of regulatory clarity. However, further efforts are needed across the region to move from legislative intent to practical implementation. With clearer guidance, stronger administrative capacity, and increased taxpayer engagement, APAs could become a powerful tool for improving tax certainty and reducing disputes.

Tanzania leads the region with a well-developed APA regime. The regulations offer both unilateral and bilateral/multilateral APAs, with clear application procedures including pre-filing meetings, formal submissions, and rollback provisions. Despite this framework, APA uptake has been modest, suggesting the need for greater taxpayer awareness and administrative outreach.

Uganda was the first in East Africa to introduce APA provisions in 2011. However, the absence of detailed implementation guidelines and an operational framework has meant that no practical APA cases have materialized. This prolonged gap highlights the challenges of translating legislation into practice.

Kenya has recently enacted APA legislation through the Finance Act 2025, signaling a strong policy commitment. Operational guidelines are still pending, and the framework is yet to be fully rolled out.

Rwanda, on the other hand, allows taxpayers to request APAs for a fixed period to determine pricing arrangements in line with the arm’s length principle, but the framework remains limited in scope and detail.

Comparing Jurisdictions

A major similarity regarding the APA programs offered across these jurisdictions is the clear understanding and realization of the benefits of an APA, hence its introduction by various governments. However, the non-operation of the APA programs has constrained the full realization of the advantages of an APA.

Although detailed guidelines on APAs have been issued in Nigeria, this is not the case for South Africa and the East African region as relevant details on the process for the APA program are yet to be issued.

Challenges to the APA Application

The South African government had noted that administrative capacity for concluding APAs is a relevant requirement, hence the need to train sufficient skilled resources for an APA unit. The lack of skilled personnel was identified as a constraint and attributed to the delay in the full implementation of an APA program in South Africa. In comparison, while the need for administrative capacity has not been expressly stated by the FIRS, it is important to note that the successful implementation of the Nigerian APA program largely depends on the FIRS’s ability to manage the complex evaluation and negotiation processes involved, hence the need to have adequately trained resources to properly handle the complex APA negotiations.

On a related note, Nigeria’s APA guidelines have been plagued by some reservations, where MNEs may find the high application fees to be prohibitive. Furthermore, an initial three-year duration of APAs may be discouraging given the time and resource investments that are often required to successfully negotiate an APA. (An APA may be renewed for a maximum term of three years or as stipulated in the relevant legislation, however significant changes to APA terms may require a new agreement.) On the other hand, SARS have favorably indicated a five-year duration, which will be a greater incentive for MNEs in South Africa.

Another likely challenge is the high eligibility thresholds stated in the Nigeria APA guidelines. It must be noted that most Nigerian MNEs may likely not meet the annual eligibility criteria. Consequently, the tax certainty and risk mitigation benefit an APA offers may not be achieved by most MNEs in Nigeria. As a resolve, it may be necessary for the FIRS to reconsider the eligibility thresholds with the aim of broadening participation of small and medium-sized (SMEs) and local businesses.

In the East African context, the main challenges relate to institutional capacity and practical readiness. While provisions for APAs have been introduced, most tax authorities in the region are still in the early stages of developing the dedicated expertise and administrative structures required to manage them effectively.

These challenges are not unique to East Africa but reflect the broader developmental stage of APA programs across emerging markets. With gradual strengthening of administrative frameworks and increased dialogue with taxpayers, the region can make meaningful progress in operationalizing its APA regimes.

Takeaways

The Nigerian, South African, and the East Africa tax jurisdictions are to be applauded on the introduction of APAs and should be encouraged to address the identified challenges to ensure the swift operationalization of APA programs in these jurisdictions, thereby leading to a more robust economic operating environment for all jurisdictions.

This article does not necessarily reflect the opinion of Bloomberg Industry Group, Inc., the publisher of Bloomberg Law, Bloomberg Tax, and Bloomberg Government, or its owners.

Author Information

Christian Wiesener is an Associate Director in KPMG’s office in Cape Town, South Africa. Barbara Mbaebie is a Senior Manager in KPMG Nigeria’s office. Lydiah Mose is a Senior Manager in KPMG’s Kenya office.

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