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Facebook, Netflix, to start paying taxes – FG

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The Federal Government has announced that Foreign digital firms offering services to Nigerians and making a profit from Nigerians will start paying taxes.

Digital service providers that provide online video streaming, social media platforms, and companies that provide digital content for downloads are required to start paying digital tax to the Federal Inland Revenue Service.

Zainab Ahmed, the Minister of Finance, had given the company income tax ( Significant Economic Presence) order, 2020 as amended of the finance Act 2019.

The injunction aimed to impose a tax on a foreign company with respect to a particular digital transaction or services if it had a Significance Economic Presence in Nigeria.

It also mentioned that the finance minister may issue a ruling in order to determine what constitutes Significance Economic Presence in Nigeria.

Digital service providers such as Facebook, Netflix, Twitter, Youtube among others are some of the digital and advertising companies that offer services to Nigerians.

E-commerce companies such as Amazon and Alibaba are making a profit in Nigeria by processing and transmitting data collected about user’s profile in Nigeria, also they serve as an intermediary between a buyer and a seller and they provide goods and services directly or through a digital platform in Nigeria.

Digital service providers whose revenue is up to N25 million or its equivalent in other international currencies from Nigeria in a year would adhere to the new regulations and especially companies that use Nigerian domain name .ng or a website in Nigeria.

The Significance Economic Presence injunction has tasked foreign companies with consistent interactions with people in Nigeria and creating their digital platforms to a specific audience in Nigeria by fixing the price of its product and services in naira to pay taxes.

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Based on the act, a foreign company providing technical services such as advertising, supplying of personnel, professional, management, training or consultancy services will possess a Significance Economic Presence in Nigeria in any fiscal year if it makes a profit or gets any payment from any person in the country, or a fixed base of an agent of a foreign company in Nigeria.

Meanwhile, the personal income tax of foreign companies employees or educational training given by digital service providers is exempted.

According to price water house coopers, it said foreign digital companies will be mandated to register for company income tax, and it’s expected to submit yearly tax returns even if they are not physically present in Nigeria.

They added that companies that are based in the country, as well as companies that have no physical presence in Nigeria that had transactions with affected none resident companies, will also be mandated to explain why it evaded paying tax on some payment made to these foreign companies.

PwC is concerned regarding how FIRS will implement its compliance without any international agreement, as some of the companies affected may be out of the territorial reach of the agency.

According to the consulting firm, the issue will also be aggravated where the firms sell their products and services directly to Nigerian consumers.

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Abudulrasheed Mubarak is a freelance content creator. He starting his writing career in 2011. He is a graduate of Auchi Polytechnic, Auchi in Urban and Regional Planning.

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