According to the amendment of the Finance Act bill, Nigeria’s Finance Minister, Zainab Ahmed, stated that foreign companies with economic viability in Nigeria are now to pay tax.
The new order makes it clear that a company does not have to be physically present in Nigeria to pay income tax. Stating that economic viability and presence in the digital and tech space, with access to the Nigerian market now qualifies a company to pay income tax to the government.
According to the amendment in the Company Income Tax (Significant Economic Presence) Order, 2020, there are other criteria besides physical presence which constitutes a significant economic presence in the country.
The Company Gets To Pay An Income Tax, As Long As The Following Are On Check:
- The company streams or downloads services of digital content, including but not limited to movies, videos, music, applications, games, and e-books to any person in Nigeria.
- The company transmits data collected about Nigerian users, where such data has been generated from such users’ activities on the digital interface including website or mobile applications.
- The company gets paid for services rendered in Nigeria and to Nigerians.
- The company derives a gross turnover or income of more than 25 million Naira or its equivalent in other currencies, in any fiscal year from its services.
- The company provides goods or services of any nature in Nigeria, directly or indirectly through a digital platform.
- The company provides intermediation services through digital platforms, a website, or any other online application that links suppliers and customers in Nigeria.
- The company uses a Nigerian domain name (.ng), or registered the website address in Nigeria;
- The company received payment from a Nigerian resident during the accounting year;
- The company has a purposeful and sustained interaction with Nigerian residents and has customized its digital page or platform to target Nigerians;
- The company furnished services of technical, professional, management, and consultancy nature including advertising.
- The company offers training to Nigerian residents for a fee.
- The company offered its products or services through satellites.
- The company has a platform targeted at Nigerians and has reflected the price of its products and services in the Nigerian currency (Naira).
- The company has provided billing and payment options in Nigerian currency.
However, there are a couple of exemptions according to the Finance Act Bill document; companies that are covered under a multilateral or consensus agreement with Nigeria. These companies shall be treated based on the already signed arrangement.
More so, a company shall not be considered to have a significant economic presence if it makes payment to employee(s) under an employment contract.
Furthermore, companies like Google, Facebook, Twitter, YouTube are now, under this amendment, compelled to pay income taxes to the Nigerian government. This is on the basis that streamed content and advertising services are offered to Nigerians.
Therefore, according to the amended Finance Act Bill, it is clear that companies like Alibaba, Amazon, and other e-commerce service providers who make a fortune from Nigerians within the Country by collecting, processing, and transmitting funds are now taxable.
Furthermore, one undeniable fact about amendment as regards social media platforms that are operational in Nigeria is that; they are now expected to file annual returns generated in Nigeria to pay income tax to the Nigerian government.
Nigerian companies may now be held accountable for not withholding tax on payments made, based on any operational dealings with the companies that fall into this category.
However, this new development in the digital sector is against the backdrop of the dot-com economy. Knowing fully well that the present structure of the Country isn’t fully equipped for optimum operation.
As entrepreneurs, we keep our fingers crossed and hope that the structure of the Nation wouldn’t be a clog in the wheel of progress towards this new development.
Tech companies whose digital products and services are created and hosted in a particular country already pay taxes to the host country.
Let’s create visibility for your brand today and put your business on the world map. Contact us today to make your brand the preferred choice among our audience of entrepreneurs and business leaders.