South Africa and Nigeria are emerging as frontrunners in adopting artificial intelligence-driven transfer pricing audits, signalling a new era of tax enforcement across Africa as revenue authorities intensify scrutiny of multinational enterprises.
Tax authorities in both countries are increasingly using advanced data analytics and AI-enabled risk assessment tools to identify potential transfer pricing irregularities, allowing them to target audits more efficiently and detect high-risk cross-border transactions with greater precision.
The shift reflects a broader trend among governments seeking to strengthen tax compliance and protect domestic tax bases amid growing international business activity.
Transfer pricing rules govern how multinational companies price transactions between related entities operating in different jurisdictions.
Tax authorities worldwide have placed greater emphasis on ensuring that such transactions comply with the arm’s length principle, preventing profits from being shifted to lower-tax jurisdictions.
In Nigeria, the Federal Inland Revenue Service (FIRS) has expanded its use of data-led reviews to assess compliance with transfer pricing regulations.
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The process typically begins with a detailed examination of disclosures and related-party transactions before authorities decide whether a full audit is warranted.
South Africa has adopted a similarly rigorous approach. The South African Revenue Service (SARS) relies on information disclosed through corporate tax returns and additional reporting requirements to identify transfer pricing risks and determine which companies should face deeper scrutiny.
Experts say the growing use of AI and advanced analytics is transforming how tax authorities conduct audits.
Automated systems can analyse large volumes of financial data, detect unusual patterns and improve risk profiling, enabling revenue agencies to focus resources on cases most likely to result in adjustments or additional tax collections.
The development comes as African tax authorities continue to strengthen transfer pricing enforcement frameworks. Organisations, including the OECD and the African Tax Administration Forum (ATAF), have long advocated enhanced risk assessment methods and improved audit capabilities to combat base erosion and profit shifting.
For multinational businesses operating across Africa, the rise of AI-powered transfer pricing audits is expected to increase the importance of maintaining robust documentation, accurate benchmarking analyses and transparent intercompany pricing policies.
Tax advisers warn that companies should prepare for more data-intensive reviews as authorities gain access to increasingly sophisticated audit technologies.
As digital tools reshape tax administration globally, South Africa and Nigeria are positioning themselves at the forefront of Africa’s evolving transfer pricing enforcement landscape, setting a benchmark that other jurisdictions across the continent may soon follow.. What is AI
Senior AI Writer
Bio: Okikiola is a writer and AI enthusiast with a background in Office Technology and Management from the Federal Polytechnic Offa. She went further to study an MSc in International Business at De Montfort University (DMU). With extensive work experience across administrative and business roles, she now focuses on exploring how artificial intelligence can transform work, innovation, and everyday life.