In a bid to increase the country’s revenue, the federal government of Nigeria has imposed a 6% tax on non-resident digital companies in Nigeria.
Zainab Ahmed, the Minister of Finance, Budget, and National Planning, revealed this at a public presentation and breakdown of the 2022 budget. She disclosed that the government, from 2017 to date, has surpassed its independent income collection target, which indicates the revenue growth strategies.
According to the minister, the federal government of Nigeria tax collection decision is under a provision of the 2021 Finance Act that allows the Federal Inland Revenue Service (FIRS) to access non-resident digital companies Companies Income Tax (CIT) turnover.
This includes companies that transmit, emits, or receive data of any kind, such as e-commerce, app stores, and online advertisements.
Ahmed said, “Section 30 of Nigeria’s Finance Act designed to amend section 10, 31 and 14 of Valued Added Tax (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 will be working with Amazon to register as a tax agent for the FIRS. So Amazon will now collect this payment and remit it to FIRS, which align with global best practices. We have been missing out on this stream of revenue”, she said.
According to the minister, 2021 records the first time the government generates independent revenues of N1.104 trillion as of November compared to the N973.41 billion.
She said, “We have now for the first time surpassed the 1 trillion mark collection for independent revenues (N1.104tn) collected as of November against a budget target of 973.41bn). Analysts have always considered our projections unrealistic, but we have always insisted on the potentials that exist to grow FGN independent revenues”.
She explained that since the digital non-resident companies do not need to be registered locally, they would have a tax collection and remittance agreement with the Federal Inland Revenue Service (FIRS) to reduce compliance stress.