Taxation Of The Digital Economy In Nigeria By
Ehinmetan John Oluwatunmise

Section 13 of the Companies Income Tax Act (CITA) as amended by the 2021 Finance Act, expanded the tax net to cover non-resident digital service providers that are liable to tax based on their significant economic presence (SEP) in Nigeria.
Thus, unlike what was obtainable under the erstwhile CITA where only non-resident companies who have a fixed base in Nigeria could be taxed on the taxable profit attributable to that fixed base. The Finance Act has intervened, so that a company which is a non-resident digital service provider and does not have a fixed base in Nigeria, can be charged tax once it is captured within the SEP threshold.
Another laudable amendment the 2021 Finance Act introduced with regards to taxation of the digital economy in Nigeria is to expand the powers of the FIRS to now assess non-resident digital service providers who have SEP in Nigeria to tax on turnover.
Section 30 of the CITA has been amended to include non-resident digital service providers that are liable to tax based on their SEP in NIgeria.
The scope of the powers of the FIRS has been expanded in such a way that it can assess the turnover of any company (including a non-resident digital service provider that is liable to tax based on its significant economic presence in Nigeria) to income tax if, “it appears to the service that for any year of assessment, the trade or business produces either no assessable profits or assessable profits which in the opinion of the service are less than might be expected to arise from that trade or business or, as the case may be, the true amount of the assessable profits of the company cannot be ascertained.” under circumstances like this, the FIRS is now empowered to assess the income derived from Nigeria to tax at a “fair and reasonable percentage”
This is a great development towards taxation of the digital economy in Nigeria as this provision seeks to ensure that non-resident digital service providers who have SEP in Nigeria do not avoid payment of tax.
We believe it is important for both resident and non-resident companies who engage in the digital space in Nigeria, to speak with lawyers for advice and to ensure that their business operation is compliant with the existing law of the jurisdiction where they operate.

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