Nigeria introduces digital taxes

On Monday, January 13, Nigeria’s President Muhammadu Buhari signed the Finance Bill 2019. Key points are digital taxes are given below:

“The bill seeks to expand the triggers for home taxation of profits earned through non-resident companies in Nigeria thru based dealers and through online marketplace platforms,” the signed file states.

This may want to affect companies including: e-commerce platforms, application stores (like Google Play Store), electronic information storage (like Amazon Web Services), on line adverts, on line payments, ocial media, among others. 

Foreign companies that offer technical, expert and consultancy services in Nigeria over the internet could also be roped in to pay the virtual tax if they have “huge monetary presence in Nigeria”.

What does this mean in practice? Some illustrative Samples

Amazon Web Services (AWS) is a famous cloud service with data centres in specific countries. It does not have any records centre in Nigeria. Yet, if a Nigeria-based organisation buys cloud garage from AWS, underneath the newly signed finance bill, AWS could should pay a sure component as tax to Nigeria.

Adobe which gives paid services for its softwares, along with Photoshop and Premiere Pro, might be susceptible to pay taxes for revenue crafted from Nigeria.

Another example is Facebook and its advertising revenue. With over 30 million users in Nigeria,
Facebook may want to pay taxes from its sales from Nigerian customers.

The equal goes for e-commerce systems like Amazon, eBay, Alibaba among others.

Do you know – its not a Naija thing?

Nigeria isn't the sole country creating laws heavy digital platforms. The move is a component of a worldwide trend by governments to introduce digital taxes. Many governments need to be able to tax businesses like Facebook and Google that are creating cash from their voters by providing digital services.

within the absence of a worldwide resolution, individual countries are imposing their own taxes. Kenya, France, Italy and therefore the kingdom recently enforced their own laws. In Nov, Kenya signed into law its own Finance Act that mirrors Nigeria’s on Digital Taxes. The UK passed the Digital Services Tax in 2019.

It imposes a 2% tax on social media platforms, search engines and on-line marketplaces utilized by kingdom users. Digital platforms with world revenues extraordinary £500m revenues and kingdom revenues of over £25m pays the tax. The Organisation of Economic Cooperation and Development is functioning on a proposal that will be acceptable to all or any countries.

What is next?

The Finance Minister still has to define what criteria for the potential tax. According to Pricewaterhouse Coopers «until the minister defines the criteria for significant economic presence the proposed updates would be redundant as they can only be applied if the criteria are defined».