FG amends laws to bring big techs under scrutiny

Nigeria, like many other countries has kick-started processes aimed at amending laws that will introduce digital taxes as well as bringing many big techs under serious scrutiny.

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.

Nigeria is one of the 129 countries under the Organization for Economic Cooperation and Development (OECD) which has yet to conclude an international agreement on digital taxation had the Finance Act 2019 amended with the aim of imposing tax on a foreign entity with respect to certain services or digital transactions if it had a ‘Significant Economic Presence’ in Nigeria, although what that entails is yet to be determined.

Tech companies’ especially big techs, in the past few years, have faced a myriad of backlash about their involvement in tax evasion; and even more intensely, with the pandemic, came a microscopic look into the affairs of these digital service providers.

It was gathered that 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 or receives any payment from a person resident in Nigeria, a forign base or agent of a foreign entity with the exemption being payments made to employees of a foreign entity or for teaching in an educational institution.

Nigeria, unlike some other countries, has no serious digital tax plans making the updates to the Finance Bill redundant pending a definition on the criteria for SEP. However, the existence of this law is still significant as it reduces the legal, political and civic resistance to any future digital tax plan, and giving the Minister of Finance full power regarding this makes it easy for Nigeria to implement the OECD plan when it is ready.

There are however, concerns as to how the Federal Inland Revenue Service (FIRS) would enforce compliance without international consensus, as a number of the companies affected might be outside the territorial reach of the agency and this problem will be worsened where the companies sell their products and services directly to individual consumers in Nigeria.

Be the first to comment

Leave a Reply

Your email address will not be published.


*