The federal government has introduced a policy requiring foreign companies that provide digital services in the country to collect and remit value added tax to the Federal Inland Revenue Service (FIRS).
Consequently, Nigerians would have to pay more for digital services.
The minister of finance, budget and national planning, Mrs. Zainab Ahmed, disclosed this during the public presentation of the 2022 budget in Abuja yesterday.
She said the 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.
“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 agreed 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,” she said.
For clarification, Ahmed said the new law applies to foreign companies that provide digital services such as, “apps, high-frequency trading, electronic data storage, online advertising” among others.
Furthermore, she said in line with Section 4 of the Finance Act, non-resident companies are expected to pay tax at 6 per cent on their turnover.
Recall that federal government had in 2019 disclosed plans to tax foreign digital service providers offering services to Nigerians according to amended provisions in the 2020 Finance Act.
“Section 4 of the ACT which is taxation of e commerce businesses owned by non-resident companies on a fair and reasonable turnover basis has been set at 6 per cent.
“This provision empowers FIRS to access non-resident firms to tax on fair and reasonable basis of turnover and from digital services provided to Nigerian customers,” the minister stated.
She said the move was aimed at modernising the taxation of information technology and the digital economy in line with current realities, adding that this is in conformity with the provisions of the National Development Plan 2021 – 2025.
