The Federal Government has says it plans to tax foreign digital services provider like Facebook, Netflix, Twitter and some others that are 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.
Nigerian 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. 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.
Control TV in an Exclusive interview with Senior Lawyer Morrison Quakers in Lagos said while the tax is enshrined and backed by section 13 of the financial act 2020 it will be difficult to implement.
Asked What the Position of the Law on this is, Barrister Quakers said..
“The position of the law is clear under the Finance Act of 2020 section 13 which says electronics and online businesses with economic interest in Nigeria are taxable. To avoid double taxation for companies with both physical and online presence in Nigeria and using services of Facebook Twitter Ali baba and a host of other services, however, will need to make a case because they are already meeting their tax obligation as one entity from which the same online and physical presence they have is generating revenue into the same singular pool, without necessarily drawing the line between the two. “Operating seperately will amount to double taxation.”
He further said ” for online Bloggs and Websites using services which the government want to tax, even though lawful and appropriate has a challenge of enforcement. “How do you enforce it; because the bulk of the money that online businesses collect as revenue does not stay within the borders of the country”.
He sighted an example saying; for an online business that wants to buy From Alibaba, I pay with my card and it is remitted 100% to an account not within the sphere of Nigeria as a country. This is not practicable: “so how then do you tax that?”
The senior Lawyer says implementing section 13 of the Financial income act 2020 as amended will be a tough one.
(C) Control TV 2020.
