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.

Kriss216:
Presidebt Buhari and APC fit wake up one morning begin Tax us for breathing.

slimfit1:


He forgot to tax fresh air.

Omooba77:


We are docile nation and un-united, reason our leaders can throw anything at us. Are the responsible for buying data for me. Data already taxed, is this not amounting to double taxations?
They have paid defenders who will come and spew nonsense as usual.

slimfit1:


It's a tool to stop Facebook from telling the world what is happening in Nigeria, it has nothing to do with tax.
Watch has Facebook is going to disappear.

Omooba77:


We are docile nation and un-united, reason our leaders can throw anything at us. Are they responsible for buying data for me. Data already taxed, is this not amounting to double taxations?
They have paid defenders who will come and spew nonsense as usual.

seunmsg:


Are they taxing your data or taxing the companies making money from Nigeria?

Are these companies paying taxes in Europe or not? So, why should they not pay taxes in Nigeria despite generating income from the country?

Will the next government not benefit from the tax reforms that the current government is carrying out? Must you guys criticize everythung?

yinchar:
Nigerians!!!

This is the new norm, every country is doing it now. You can’t be making money from a country and not pay tax!

Every foreign purchase from eBay or Amazon is subjected to online tax, which mean you paying tax to that country, because it’s a law.

Same thing should apply in Nigeria as well, online companies irrespective of where they are based or located should pay tax for income originating from Nigeria.

Omooba77:


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.

I guess you can comprehend the bolded sir

seunmsg:


Is the new law made to tax your data or tax the companies making money from Nigeria? If Nairaland is paying taxes in Nigeria, why should Facebook, Netflix, Twitter etc not pay taxes from the revenue made in Nigeria?

Are these companies paying taxes in Europe or not? So, why should they not pay taxes in Nigeria despite generating income from the country?

Will the next government not benefit from the tax reforms that the current government is carrying out? Must you guys criticize everything?

See, this new law is long overdue. It should have been in place a long time ago.

seunmsg:


The concern raised by PwC is about how to enforce the law and not whether it’s appropriate or not. Facebook, Netflix, and Twitter do not sell data to you so what’s your point?

Your initial post was to attack the entire idea and that is what I found appalling. I don’t get why a Nigerian should have a problem with the government asking companies making money from Nigeria to pay their fair share of taxes like every other corporate entity.

Omooba77:


You pay them using your data, even after subscribing.
You know FG can not tax all these platforms, the taxes will be pass down to direct consumers. Just as they do for data subscription, payment for PHCN, DSTV and so on.

seunmsg:


Wrong. We don’t pay them by using our data. We pay MTN, Glo, Airtel, and other data service providers for using data and not Facebook, Netflix and Twitter.

Facebook, Netflix, Twitter, Google, Nairaland etc make money from advertisement. So many companies and individuals pay them for targeted adverts in Nigeria. Do you have an idea how much these companies are taking in from Nigeria?

SeverusSnape:


We don suffer for this country under this administration. Tax that they will still embezzle, Afterwards, They run to IMF or China for loan.

Omooba77:


How does your data get depleted? You dont pay for You tube too.
How do you seperate adverts meant for Nigeria in Lagos, UK or America?

Kyase:
I once told you to always read before commenting so you wont look stupid....

anyways i support this...........

seunmsg:


People pay money to watch movies on Netflix or IrokoTV. After paying, you still have to buy data to watch or download. If you pay to watch DSTV at home, you will still need to pay for electricity or fuel your generator to watch TV. Data is just like the money you pay for electricity. How much you pay for electricity is not DSTV’s problem.

danielconstant:
No insults please...just read and move on

Omooba77:

#4k to access Netflix. Do you pay to access google or nairaland?

seunmsg:


The 4k goes to Netflix. The payment is for the content Netflix is offering and such revenue is what government want to subject to tax. I can’t help you again if you still can’t understand.