Nigeria To Charge 6% Tax on Digital Services, Non-Resident Companies
The minister of finance in Nigeria has announced the government would now charge offshore companies providing digital services to local customers in Nigeria a six percent tax on turnover as provided in the 2021 Finance Act.
The digital services would be charged to foreign companies that provide digital services such as apps, high-frequency trading, electronic data storage, online and advertising, among others.
The new policy is contained in Section 30 of the Finance Act which amended the provisions of Section 10, 31 and 14 on VAT obligations for non-resident digital companies.
Ahmed said, “Section 30 of the Finance Act designed to amend section 10, 31 and 14 of VAT is in relations to VAT obligations for non-resident digital companies and the mechanism that will be used is to restrict VAT obligations mainly to digital non-resident companies who supply individuals in Nigeria who can’t themselves self-account for VAT.
“So if you visit Amazon, we are expecting Amazon to add VAT charge to whatever transaction you are paying for. I am using Amazon as an example. We are going to be working with Amazon to be registered as a tax agent for the FIRS”, she said.
She noted that in line with Section 4 of the Finance Act, non-resident companies are now expected to pay tax at six per cent per cent on their turnover.
The minister who stated that the government was desirous of modernising taxes for its digital economy and to improve compliance, noted that digital non-resident companies do not need to be registered locally but would have an arrangement with the Federal Inland Revenue Services(FIRS) to collect and remit taxes in a bid to reduce the compliance burden.
She also disclosed that the federal government introduced an excise duty of N10 per litre on all non-alcoholic, carbonated and sweetened beverages in the country.
The minister stated that the charge on beverages was also a new policy introduced in the Finance Act which was signed into law by President Muhammadu Buhari on December 31, 2021, alongside the 2022 Appropriation Bill.
The minister pointed out that the new sugar tax was introduced to raise excise duties and revenues for health-related and other critical expenditures in line with the 2022 budget priorities.
The aimed according to her, was to also discourage excessive consumption of sugar in beverages, which contributed to diabetes, obesity and other diseases adding that the Finance Act had also raised excise duties and revenues for the health sector.
She also said that a provision had been made under the Act to reinforce the FIRS mandate as the principal tax collection agency while collaborating with other law enforcement Ministries, Departments and Agencies (MDAs).