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The Nigerian government has announced plans to tax digital providers of services such as video streaming sites, and social media platforms among others deemed as foreign digital services to Nigerians and earning revenue in naira.
Facebook, Twitter, Netflix and other companies offering downloads of digital contents including advertising services are now expected to pay digital tax to the Federal Inland Revenue Service (FIRS) under a new tax order laid out by the Minister of Finance, Zainab Ahmed.
As issued by the minister, the Companies Income Tax (Significant Economic Presence) Order, 2020 as an amendment of the Finance Act 2019, imposes tax on any “foreign entity with respect to certain services or digital transactions if it had a Significant Economic Presence (SEP) in Nigeria.
Also, the finance minister may by order, determine what constituted SEP in Nigeria.
According to PricewaterhouseCoopers, some of the affected foreign digital companies would be required to register for income taxes in Nigeria and file annual tax returns even if they did not have a physical presence in Nigeria.
The new regulation would apply to companies with income of N25m or equivalent in other currencies from Nigeria in a year and those with a Nigerian domain name (.ng) or a website address in the country.
Under the SEP, foreign companies with sustained interactions with persons in Nigeria and customising their digital platforms to target persons in Nigeria must state the prices of their products or services in naira to pay taxes.
The Act states that “a foreign entity providing technical services such as training, advertising, supply of personnel, professional, management or consultancy services shall have a SEP in Nigeria in any accounting year if it earns any income or receives any payment from a person resident in Nigeria or a fixed base or agent of a foreign entity in Nigeria.”
