The dragnet of federal government pursuit of new revenue base has shifted to the social media as it has issued Companies Income Tax Significant Economic Presence (SEP) order that requires Over-the-Top (OTT) services providers to declare the revenue they generate from Nigerian consumers and pay taxes to the Federal Inland Revenue Service (FIRS).
The social media involved in the tax drive include YouTube, Facebook, Twitter, WhatsApp, Blackberry Messenger and many others.
Early in February, Vice President Yemi Osinbajo, had explained that “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. Under the new Act, once you have a significant economic presence in Nigeria, you are liable to tax whether you are resident here or not.”
For Nigeria, taxation will definitely serve as a means to curb the excesses of the OTTs while also boosting the nation’s tax base.
The order, issued by Minister of Finance, Budget and National Planning, Mrs Zainab Ahmed, imposes 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 Minister may by the order determine what constitutes SEP in Nigeria.
Under the new rule, e-commerce companies like Alibaba and Amazon that generate revenue from Nigeria by processing and transmitting data collected about users in Nigeria, provision of goods or services directly or through a digital platform or offer intermediate services that link suppliers and customers in Nigeria, are to be taxed.
The new regulation would apply to companies with income of N25m or equivalent in other currencies from Nigeria in a year and those with a Nigerian domain name (.ng) or a website address in the country.
The SEP order mandated foreign companies with sustained interactions with persons in Nigeria and customising their digital platforms to target persons in Nigeria by stating the prices of its products or services in naira to pay taxes.
According to the Act, a foreign entity providing technical services such as training, advertising, supply of personnel, professional, management or consultancy services shall have a SEP in Nigeria in any accounting year if it earns any income or receives any payment from a person resident in Nigeria or a fixed base or agent of a foreign entity in Nigeria.
However, payments made to employees of a foreign entity or for teaching in an educational institution are exempted.
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.
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.
Under the new order, Nigerian Communications Commission (NCC), which hitherto 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.
