Non-resident companies providing digital services in Nigeria will pay 6% tax on revenues earned according to the Finance Act signed into law by President Muhammadu Buhari on December 31, 2021.
This 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. The Finance Act also empowers the Federal Inland Revenue Service (FIRS) to assess and charge on the turnover of the digital companies transmitting or operating in the country.
According to Ahmed, “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.
“So Amazon will now collect this payment and remit to FIRS and this is in line with global best practices, we have been missing out on this stream of revenue.
According to her, the new law applies to foreign companies that provide digital services such as apps, high-frequency trading, electronic data storage, online and advertising, among others.
She said the Finance Act also considers reducing tax compliance orders on non-resident taxpayers who are not required to register for VAT in Nigeria.
“So they don’t really have to come and be registered companies in Nigeria.
“All they need is that arrangement with FIRS where they collect VAT on behalf of FIRS and remit to FIRS.
“And also, to clarify, that FIRS may appoint persons including non-resident companies for the purpose of VAT collection and to clarify again that appointed persons may collect and remit taxes to FIRS, pursuant to the relevant tax laws.
“The core rationale for this is to modernize the taxation of ICT and digital economy in line with the National Development Plan 2021-2025, to enhance administrative modalities for the taxation of non-resident taxpayers and also to reduce incompliance by non-resident payers to reduce the compliance burden.”