The federal government has proposed the collection of
companies income tax (CIT) from profits made by foreign digital companies with
“significant presence” in the country.
The 2021 Finance Bill which was transmitted to the national
assembly also empowered the Federal Inland Revenue Service (FIRS) to administer
the tax.
The bill is for tax collection in 2022.
The bill amends Capital Gains Tax Act; Companies Income Tax
Act; Federal Inland Revenue (Establishment) Act; Personal Income Tax Act; Stamp
Duties Act; Tertiary Education Trust Fund (Establishment) Act; Value Added Tax
Act; Insurance Act; Nigerian Police Trust Fund (Establishment) Act; National Agency
for Science and Engineering Infrastructure Act; Finance Control and Management
Act; and Fiscal Responsibility Act; and for Related Matters, 2021.
Last week, President Muhammadu Buhari transmitted the bill
to the national assembly, advising that it will aid tax and levy collections in
the 2022 fiscal year.
If passed into law, the FIRS will assess and charge on the
turnover of the digital companies transmitting or operating in the country.
These companies include Twitter, Alibaba’s AliExpress, Facebook (Meta), Google,
and others.
Over the years, the federal government has been looking for
possible ways to tap and incorporate the digital economy into the tax net.
The bill repealed section 13 of the Companies Income Tax Act
and empowered the FIRS to tax the profits of a company, any trade or business
without a base in Nigeria but transmits, emits, or receives signals, sounds,
messages, images, or data of any kind by cable, radio, electromagnetic systems
or any other electronic or wireless apparatus to Nigeria in respect of any
activity.
It added that such assessment and charge would be a fair and
reasonable percentage of the turnover attributable to that presence.
The bill further listed those businesses as electronic
commerce, application store, high-frequency trading, electronic data storage,
online adverts, participative network platform, online payments, and so on.
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