Off-shore e-commerce firms like Amazon, Facebook, Instagram affected
By Jeph Ajobaju, Chief Copy Editor
Facebook on January 1 began charging 7.5 per cent Value Added Tax (VAT) on advertisements placed from Nigeria and the government has clarified the move by confirming that Facebook and other digital platform are now to pay tax.
Finance Minister Zainab disclosed that 6 per cent tax would be charged on turnover on e-commerce businesses provided by non-resident companies in Nigeria, such as Facebook, Instagram, Amazon, and Twitter (when its ban is lifted).
She explained at a public presentation and breakdown of the 2022 budget in Abuja that tax collection is in line with the 2021 Finance Act.
The Act empowers the Federal Inland Revenue Service (FIRS) to assess Company Income Tax (CIT) on the turnover of a foreign digital company involved in transmitting, emitting, or receiving signals, sounds, messages, images, or data of any kind, including e-commerce, app stores, and online adverts.
President Muhammadu Buhari on December 31, 2021 signed the 2022 budget of N17.126 trillion into law alongside the Finance Bill to ensure implementation at the start of the new year.
__________________________________________________________________
Related articles:
Abuja blames high debt on firms dodging N7tr tax payment
Abuja cranks out more taxes for officials to steal. Literally
Abuja’s tax plan stokes fear of business closures, job losses
CSOs decry social media tax plan by FIRS
__________________________________________________________________
Tax obligations of non-resident firms
“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,” Ahmed explained, as reported by Nairametrics.
“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.”
She said the government will modernise taxes for the digital economy and improve compliance.
Digital non-resident companies do not need to be registered locally but would have an arrangement with the FIRS to collect and remit taxes to reduce the compliance burden, she explained.
Ahmed announced that Abuja has surpassed collection target for independent revenues, saying Nigeria for the first time collected independent revenues of N1.104 trillion as of November 2021 against a target of N973.41 billion.
Finance Act 2021
Finance Act 2021 empowers the FIRS to assess Non-Resident Firms and tax them on Fair & Reasonable Turnover Tax Basis on Turnover from providing Digital Services to Nigerian customers.
It restricts VAT obligations mainly to Digital Non-Resident Companies (who supply individuals who cannot self-account for VAT).
The Act is expected to reduce compliance burden on other Non-Resident Taxpayers who are not required to register for VAT in Nigeria.
Ahmed clarified that the FIRS may appoint persons (including non-residents) to collect tax.
