Zainab Ahmed By Ife Ogunfuwa The Federal Government plans to tax foreign digital service providers offering services to Nigerians ...
Zainab Ahmed |
By Ife Ogunfuwa
The Federal Government plans to tax foreign digital service
providers offering services to Nigerians and earning revenue in naira.
Some of these service providers which are video streaming
sites, social media platforms, and companies that offer downloads of digital
contents are expected to pay digital tax to the Federal Inland Revenue Service.
The Minister of Finance, Zainab Ahmed, had issued the
Companies Income Tax (Significant Economic Presence) Order, 2020 as an
amendment of the Finance Act 2019.
The order aimed to impose tax on a foreign entity with
respect to certain services or digital transactions if it had a Significant
Economic Presence in Nigeria.
It further stated that the finance minister may by order,
determine what constituted SEP in Nigeria.
Netflix, Facebook, Twitter, among others are some of these
foreign companies that offer digital video and advertising services to
Nigerians.
Others like Alibaba and Amazon generate revenue from Nigeria
by processing and transmitting data collected about users in Nigeria, provision
of goods or services directly or through a digital platform or offer
intermediate services that link suppliers and customers 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.
The SEP order mandated foreign companies with sustained
interactions with persons in Nigeria and customising their digital platforms to
target persons in Nigeria by stating the prices of its products or services in
naira to pay taxes.
According to the Act, 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.
However, payments made to employees of a foreign entity or
for teaching in an educational institution are exempted.
Analysts at PricewaterhouseCoopers said 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.
They added that Nigerian resident businesses (as well as the
fixed bases of non-resident companies) that have transactions with the affected
non-resident companies would also be required to account for withholding tax on
some of the payments made to these foreign companies.
PwC raised concerns as to how the FIRS would enforce
compliance without international consensus, as a number of the companies
affected might be outside the territorial reach of the agency.
According to the consulting firm, the problem will also be
exacerbated where the companies sell their products and services directly to
individual consumers in Nigeria.
Source
No comments