Google, Netflix, Facebook, and other foreign companies operating in Nigeria have paid more than N1.98 trillion in taxes to the Federal Government in the past 15 months.
This substantial figure encompasses both Company Income Tax (CIT) and Value Added Tax (VAT), and the data is derived from the National Bureau of Statistics.
CIT, a 30 per cent tax imposed on company profits, and VAT, a 7.5 per cent consumption tax applicable to goods and services transactions, are included in this contribution. The Federal Inland Revenue Service provided these insights.
Back in 2020, there were reports of the Federal Government’s intention to levy taxes on foreign digital service providers who cater to Nigerians and generate revenue in naira.
Certain service providers, such as video streaming platforms, social media companies, and those offering digital content downloads, are expected to adhere to this digital tax stipulated by the Federal Inland Revenue Service.
The Companies Income Tax (Significant Economic Presence) Order of 2020, an amendment of the Finance Act 2019, was issued by the former Minister of Finance, Zainab Ahmed. The order targeted taxing foreign entities that engage in specific services or digital transactions while having a Significant Economic Presence in Nigeria.
Netflix, Facebook, Twitter, as well as others, fall under these foreign companies that offer digital video and advertising services to Nigerians.
Entities like Alibaba and Amazon generate revenue from Nigeria through data processing, direct/intermediary services, and provision of goods via digital platforms.
The new regulations encompass companies earning N25 million or equivalent yearly from Nigeria or having a Nigerian domain name (.ng) or website address.
The SEP order mandates foreign companies with sustained interactions and tailored digital platforms targeting Nigeria to pay taxes.
Section 30 of the Finance Act, which amended sections 10, 31, and 14 on VAT obligations for non-resident digital firms, includes a six per cent tax on turnover for offshore companies offering digital services to Nigerian customers.
Former finance minister Ahmed highlighted the inclusivity of services like apps, trading, data storage, and online advertising in this tax policy.
This policy shift reflects the government’s ambition to modernise taxes within its digital economy and enhance compliance, reducing the burden on non-resident companies while ensuring tax collection through collaborations with the FIRS.
Concerns were raised by PricewaterhouseCoopers regarding enforcing compliance without international consensus, particularly for companies beyond the FIRS’s jurisdiction.
Despite these complexities, The PUNCH’s findings reveal that these companies have collectively paid N1.98 trillion in taxes from Q1 2022 to Q1 2023.
Within this time frame, N1.32 trillion was collected through CIT, and N661.93billion through VAT, contributing to the Federal Government’s revenue.
Quarterly breakdowns show variations in these numbers, showcasing both increases and declines on a year-on-year and quarterly basis.
This financial contribution by foreign firms underscores their substantial role in Nigeria’s economic landscape and underscores the evolving tax regulations governing their operations.