Nigeria introduces 6% tax on international e-commerce

As part of efforts to address its revenue challenge, the Nigerian government has decided to charge a 6% tax on the turnover of e-commerce businesses provided by non-resident companies in the country. 

The Minister of Finance, Budget, and National Planning, Mrs Zainab Ahmed, who disclosed this during the public presentation and breakdown of the 2022 budget held in Abuja on Wednesday, said: “Section 30 of the Finance Act designed to amend Sections 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.”

The tax collection is in line with the provision of the 2021 Finance Act, which empowered the FIRS to access CIT on the turnover of a foreign digital company involved in transmitting, emitting, or receiving signals, sounds, messages, images, or data of any kind including e-commerce, app stores, and online adverts.

Recall that President Muhammadu Buhari, on the 31st of December 2021, signed the 2022 budget of N17.126 trillion, alongside the passing into law the Finance Bill, which ensured the immediate kick-off at the start of the new year.

“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 registered as a tax agent for the FIRS.”

Ahmed highlighted the desire of the federal government to modernise taxes for its digital economy and to improve compliance, explaining that digital non-resident companies do not need to be registered locally but would have an arrangement with the Federal Inland Revenue Services (FIRS) to collect and remit taxes in a bid to reduce the compliance burden.

The minister also disclosed that the government has surpassed its collection target for its independent revenues, explaining that for the first time, Nigeria had collected independent revenues of N1.104 trillion as of November 2021 as against a target of N973.41 billion.

The introduction of the 6% tax on digital services offered to Nigerians by non-resident companies, implies that Nigerians who visit e-commerce platforms not resident in Nigeria will pay VAT on items purchased online. This is expected to drive growth in Nigeria’s non-oil revenue. (Nairametrics)