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FG plans to tax Netflix, Facebook, others

The Federal Government plans to tax foreign digital service providers offering services to Nigerians and earning revenue in naira.

Some of these service providers which are video streaming sites, social media platforms, and companies that offer downloads of digital contents are expected to pay digital tax to the Federal Inland Revenue Service.

The Minister of Finance, Zainab Ahmed, had issued the Companies Income Tax (Significant Economic Presence) Order, 2020 as an amendment of the Finance Act 2019.

The order aimed to impose tax on a foreign entity with respect to certain services or digital transactions if it had a Significant Economic Presence in Nigeria.

It further stated that the finance minister may by order, determine what constituted SEP in Nigeria.

Netflix, Facebook, Twitter, among others are some of these foreign companies that offer digital video and advertising services to Nigerians.

Others like Alibaba and Amazon generate revenue from Nigeria by processing and transmitting data collected about users in Nigeria, provision of goods or services directly or through a digital platform or offer intermediate services that link suppliers and customers in Nigeria.

The new regulation would apply to companies with income of N25m or equivalent in other currencies from Nigeria in a year and those with a Nigerian domain name (.ng) or a website address in the country.

The SEP order mandated foreign companies with sustained interactions with persons in Nigeria and customising their digital platforms to target persons in Nigeria by stating the prices of its products or services in naira to pay taxes.

According to the Act, a foreign entity providing technical services such as training, advertising, supply of personnel, professional, management or consultancy services shall have a SEP in Nigeria in any accounting year if it earns any income or receives any payment from a person resident in Nigeria or a fixed base or agent of a foreign entity in Nigeria.

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