With dwindling revenue, Nigeria has revealed plans to tax video streaming sites, companies that offer digital content downloads and social medial platforms.
The companies which provide services to Nigerians and earn revenue in Naira are expected to pay digital tax to the Federal Inland Revenue Service, according to a Companies Income Tax Order 2020 issued by the Minister of Finance, Zainab Ahmed. The order is an amendment to the Finance Act 2020.
This puts digital content providers like Netflix, and social media networks like Facebook and Twitter on the country’s crosshairs.
The order states that the Nigerian finance minister is empowered by to determine what constitutes Significant Economic Presence in the country.
The new regulation is expected to apply to companies with income of N25m (about $64,000) per annum or its equivalent in other currencies. It also applies to any company with a Nigerian domain name (.ng) or a website address in the country.
The SEP order mandates foreign companies with sustained interactions with persons in Nigeria and those whose digital platforms target persons in Nigeria to state the prices of their products or services in naira in order 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 to employees of a foreign organisation or for teaching in an educational institution are exempted.
Analysts say many foreign digital companies affected by the regulation would be expected to register for income taxes in Nigeria and file annual tax returns even if they did not have a physical presence in the country.
But there may be challenges ahead. Experts say this may come when companies sell their products and services directly to individual consumers in Nigeria.
