Nigeria’s Federal Government has concluded plans to tax foreign digital service providers offering services to Nigerians and earning revenue in naira, otherwise known as over-the-top (OTT) services providers in Nigeria such as YouTube, Facebook, Twitter, WhatsApp, Blackberry Messenger and many others. This is one of the major fallouts of the new finance Act which now subject all multinational digital companies operating abroad with significant economic presence in Nigeria to taxation.
“So, most digital and multinational technology companies do not have a physical presence in Nigeria, yet make significant income in Nigeria from online activities. They pay no tax to Nigeria because they do not have a physical presence in Nigeria, now we are no longer relying on physical presence,” Nigeria’s Vice President Yemi Osinbajo had earlier said in February, 2020.
Here Is What You Need To Know
- 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.
- By this move, Nigeria is following the steps of many countries which have policies that guide these services.
- Only companies that have a physical presence in the country were being taxed previously
“Under the new Act, once you (foreign digital company) have a significant economic presence in Nigeria, you are liable to (digital) tax whether you are resident here or not,” Osinbajo had earlier noted.
- For Association of Telecommunications Operators of Nigeria (ALTON), the umbrella body of telecom operators in the country, it is not right that a company providing traditional telecommunications services has to meet certain regulatory requirements, like those concerning data protection and taxes while a company providing comparable services over the web does not.a
An over-the-top (OTT) media service is a streaming media service offered directly to viewers via the Internet. OTT bypasses cable, broadcast, and satellite television platforms that traditionally act as a controller or distributor of such contents.
Gbenga Adebayo, chairman, ALTON, recently said that:
“We are beginning to see the need for regulators to look at regulating technology instead of services.
“These over-the-top services have social, economic and security implications. If they are not licensed, it means they are not regulated, and in that case, there is no limit to the scope of what they can do. There is also no control over services and content they may provide,” he said.
Nigerian Communications Commission (NCC) which until now has insisted on technology neutrality of the OTTs may be forced to facilitate the revenue generating process with the right technological devices to ensure transparency.
Charles Rapulu Udoh
Charles Rapulu Udoh is a Lagos-based lawyer who has advised startups across Africa on issues such as startup funding (Venture Capital, Debt financing, private equity, angel investing etc), taxation, strategies, etc. He also has special focus on the protection of business or brands’ intellectual property rights ( such as trademark, patent or design) across Africa and other foreign jurisdictions.
He is well versed on issues of ESG (sustainability), media and entertainment law, corporate finance and governance.
He is also an award-winning writer.