FG Set to Tax Non-resident Digital Firms at 6% of Turnover

The federal government plans to tax non-resident digital companies that sell products to local customers at six per cent of turnover in Nigeria.

The Minister of Finance, Nigeria

The Finance Minister, Zainab Ahmed has said on Wednesday, as part of fiscal reforms to boost revenues and diversify the oil-dependent economy.

At around 4.5 per cent of Gross Domestic Product (GDP), Nigeria has one of the lowest tax rates in the world and has struggled to increase tax collection from its non-oil sector.

Recall, the World Bank said last year that Nigeria could raise the proportion to around 7% over the coming three years, assuming property tax, excise duty and personal income reforms are undertaken, and that non-oil taxes needed to be at least 12.75 per cent of GDP.

“This is introducing a turnover tax on a fair and reasonable basis,” Ahmed said referring to the value-added tax (VAT) obligation of digital non-resident companies.

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Such digital services include apps, high-frequency trading, electronic data storage and online advertising, Ahmed said in a televised speech discussing the 2022 budget signed into law last week.

Ahmed said the government wants to modernise taxes for its digital economy and to improve compliance.

She said digital non-resident companies do not need to be registered locally but would have an arrangement with the Nigerian tax authority to collect and remit taxes, as a way to reduce the compliance burden.