Nigerians may have to pay more for digital services as 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.
The Minister of Finance, Budget and National Planning,
Zainab Ahmed, said this during the public presentation of the 2022 budget in
Abuja on Wednesday.
She said that 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.
The Minister 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 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.
For clarification, the Minister 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.
Speaking further, Ahmed noted that in line with Section 4 of
the Finance Act, non-resident companies are now expected to pay tax at 6 per
cent on their turnover.
The 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.
However, this is the first time the government is setting a
specific tax rate.
Ahmed said, “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.”
She said the move was aimed at modernizing 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.
Earlier in December 2021, Facebook, in a statement,
disclosed that it will, from January 1, 2022, begin to charge VAT on the sale
of advertisement to advertisers, regardless of whether they’re buying ads for
business or personal purposes.
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