The Minister of Finance, Budget and National Planning, Mrs. Zainab Ahmed has disclosed that the federal government would henceforth charge offshore companies providing digital services to Nigerian residents a six per cent tax on turnover in compliance with the 2021 Finance Act.
The minister disclosed this on Thursday during the public presentation and breakdown of the 2022 budget held in Abuja.
She explained that this new tax policy will affect apps, high frequency trading, electronic data storage and online advertising, adding that, “this is introducing turnover tax on a fair and reasonable basis.”
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.
Ahmed said, “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 registered as a tax agent for the FIRS.
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“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 noted that in line with Section 4 of the Finance Act, non-resident companies are now expected to pay tax at six per cent per cent on their turnover.
The minister who stated that the government was desirous of modernising taxes for its digital economy and to improve compliance, noted that digital non-resident companies do not need to be registered locally but would have an arrangement with the Federal Inland Revenue Services(FIRS) to collect and remit taxes in a bid to reduce the compliance burden.
