Non Resident Companies Like Amazon, Others To Remit 6 Percent Tax On Income Generated From Nigeria Customers
The federal government of Nigeria has mandated digital Non-Resident Companies (NRC) to remit 6 percent tax on income generated from digital services rendered to Nigerian customers.
Non-resident companies can be defined as companies or entities that are not registered or incorporated in Nigeria but derives income or profits from Nigeria. These include Amazon, AliExpress, Twitter, Zoom Inc. and others.
At the public presentation of the 2022 approved budget held at Abuja on Wednesday, the minister of finance, budget and national planning, Ahmed Zainab revealed that the new tax policy has been included in the Finance Act signed into law on the last day of 2021 by the President Muhammadu Buhari.
The Finance Act empowers the Federal Inland Revenue Service (FIRS) to assess Company Income Tax (CIT) on the turnover of foreign digital companies involved in transmitting, emitting, or receiving signals, sounds, messages, images, or data of any kind including e-commerce, app stores, and online adverts. Also, Non-residents making taxable supplies to recipients in Nigeria have the primary obligation to charge, collect and remit VAT to FIRS.
The minister affirmed that section 4 of the Act made provisions for the taxation of e-commerce businesses by non-resident companies on a fair and reasonable turnover basis of 6 percent.
Ahmed said, “this provision empowers FIRS to access non-resident firms to tax on Fair and Reasonable Turnover Tax Basis on turnover earned from digital services provided to Nigerian customers. The rationale for this is to modernize the taxation of ICT and digital economy in line with current realities, and this is in conformity with the provisions of the national development plan of 2021.”
she added that “such digital services include apps, high-frequency trading, electronic data storage, online advertising and several others.”
According to the Finance Act, the digital Non-Resident companies are obliged, to collect VAT from their Nigerian customers and remit to the FIRS.
Ahmed further explained that “the mechanism that will be used is to restrict VAT obligations mainly to digital non-resident companies who supply individuals in Nigeria, who cannot themselves self-account for VAT.
“If you visit Amazon, we are expecting Amazon to add a VAT charge to whatever transaction you are paying. I am using Amazon as an example. We are going to be working with Amazon to agree to be registered as a tax agent for the FIRS. So Amazon will now collect this payment and remit it to FIRS, and this is in line with global best practices. We have been missing out on these revenue streams.”
Discussing non-resident taxpayers, Ahmed said the Finance Act puts into consideration reducing tax compliance orders on non-resident taxpayers who are not required to register for VAT in Nigeria.
“So they don’t really have to come and be registered companies in Nigeria. All they need is that arrangement with FIRS where they collect VAT on behalf of FIRS and remit to FIRS.
“And also, to clarify, that FIRS may appoint persons including non-resident companies for the purpose of VAT collection and to clarify again that appointed persons may collect and remit taxes to FIRS, pursuant to the relevant tax laws.
“The core rationale for this is to modernise the taxation of ICT and digital economy in line with the National Development Plan 2021-2025, to enhance administrative modalities for the taxation of non-resident taxpayers and also to reduce incompliance by non-resident payers to reduce the compliance burden.” She said.
According to the PWC Nigeria report, Nigeria’s Finance Bill 2021 seeks to amend 12 different laws, that become effective in the Year 2022. They are;
- Capital Gains Tax Act (CGTA)
- Companies Income Tax Act (CITA)
- Federal Inland Revenue Service (Establishment) Act [FIRSEA]
- Personal Income Tax Act (PITA)
- Stamp Duties Act (SDA)
- Tertiary Education Trust Fund (Establishment) Act [TETFEA]
- Value Added Tax Act (VATA)
- Insurance Act
- Nigerian Police Trust Fund (Establishment) Act [NPTFEA]
- National Agency for Science and Engineering Infrastructure Act (NASENI Act)
- Finance (Control and Management) Act [FCMA], and
- Fiscal Responsibility Act (FRA)
Nigeria Raises Interest Rate by 50 Basis Points to 18%
The Central Bank of Nigeria (CBN) led monetary policy committee has raised the nation’s borrowing cost by another 50 basis points following a 500 basis points increase in 2022 to 18%.
The committee attributed its decision to the rising inflation rate and the need to contain price development around expectations of subsidy removal and other energy sources.
“These in the view of members, provides a compelling argument for an upward adjustment of the policy rate, albeit, less aggressively. The Committee, however, noted that the naira redesign and cash withdrawal limit policies have resulted in a sizeable reduction in Currency-Outside-Banks, indicating an expected improvement in the potency of monetary policy tools,” the minutes stated.
Another factor considered was the drop in capital importation and the impact of exchange rate pressure on domestic price levels.
The committee, therefore, called for policies to attract both portfolio and foreign direct investment to Nigeria.
It maintained optimism that, the continued progress made with the RT200 FX programme, Naira-4-dollar and
other policies targeted at attracting diaspora remittances, would continue to help improve accretion to the external reserves and improve liquidity in the foreign exchange market.
Members, however, remained aware of the ongoing challenges associated with the limits imposed on cash withdrawals in the face of frequent downtime in bank electronic transaction channels. The Committee thus called on Other Depository Corporations, online payment platforms, and other stakeholders to ensure that the prevailing incidence of network failures is overcome in the immediate and short term.
This would ensure that the Naira Redesign and Cash Withdrawal Limit Policies lead to an improved in-road of the CBN Cashless program and efficiency of the transmission mechanism of monetary policy.
Members, therefore, agreed to raise Monetary Policy Rate by 50 basis points, with ten members voting to raise the MPR by 50 basis points while one member voted to raise the MPR by 25 basis points and one member voted to hold the MPR. All members voted to keep all other parameters constant.
CBN Will Make More Redesigned Currency Available, Resolve Failed Bank e-Transactions– Emefiele
The Central Bank of Nigeria (CBN) Governor, Godwin Emefiele has said that about N1 trillion is currently in circulation and more redesigned naira notes will be made available to the citizens.
This is as he apologised for the increase in failed digital bank transactions, promising that the online payment system hitches will be resolved soon.
The CBN governor spoke on Tuesday at the close of the two-day monetary policy committee meeting held in Abuja.
Investors King reports that Nigerians have been faced with cash scarcity since January, 2023 and recently, rise in failed electronic bank transactions done through bank mobile apps, debit cards and USSD channels making payment more difficult.
Emefiele assured that the CBN payments system management department are working on it to ensure that the situation is improved and electronic banking channels are resolved on time.
He commended the fintechs for complementing payment channels to reduce the workload on traditional banks in Nigeria.
His words, “I must apologise. Yes, online channels fail. But no doubt it is as a result of the deluge of online transactions that hit the banking industry. But it is being resolved,” Emefiele said.
“On a daily basis, our payments system management department monitors the online payment platforms so as to make sure that when there is a downtime, they are quickly resolved so that transactions can go on smoothly.”
According to the CBN Boss, the apex bank is working to ensure that more redesigned notes are circulated but are not kept outside the bank as the redesign policy aims to checkmate storing money in other places.
He gave the details of the redesigned naira notes pumped into circulation at the beginning of the policy as N3.23 trillion, of which only N500 billion was kept in bank accounts while N2.73 trillion was stored outside the banks.
“It was published yesterday that currency in circulation is close to N1 trillion. CBN will continue to pump the newly redesigned currency into the market.
“The truth is that at some point we will need to reassess to know whether the currency in circulation has attained an optimal level so as to put in place measures to ensure that we don’t go to the level where we were when people kept money outside the banking system for their own benefits,” he added.
Nigeria Labour Congress Calls for Nationwide Strike and Picketing of Central Bank of Nigeria Branches
The President of the Nigeria Labour Congress, Joe Ajaero, has directed public sector workers in the country to commence a nationwide strike from Wednesday next week.
He also ordered affiliate unions of the Nigeria Labour Congress to be on standby for picketing exercises across all branches of the Central Bank of Nigeria (CBN) nationwide.
This directive was issued following an earlier ultimatum by the Central Working Committee members of the NLC last week, criticising the cash swap policy of the Federal Government. Ajaero expressed disappointment that the Federal Government and the CBN had not shown any commitment to address the situation.
The NLC President lamented that despite the Supreme Court order allowing the old N500 and N1000 notes to circulate with the new notes until December 31 this year, the situation appears to be getting worse as workers cannot access cash to pay fares to work, nor can they buy food for their families.
At a press briefing on Wednesday at the headquarters of NLC, the apex labour union also criticised the pricing irregularities in the petroleum sector, which they claimed was another cause for concern.
“Last week, we gave an ultimatum for the review of the cash crunch bedeviling the country, but we have discovered to our dismay that as at this moment not much effort has been made to ameliorate the situation. The government is still foot-dragging on these issues we raised,” said Ajaero.
“Based on this, we met again this morning to review our position and resolved that by Wednesday next week, all CBN branches will be picketed. Workers are directed to stay at home too because people cannot eat, workers can no longer go to the office. We have been pushed to the wall, we have decided to take our destiny in our hands, we have mobilised our workers for this exercise,” Ajaero added.
This development is likely to have significant economic implications, as the CBN plays a crucial role in the management of Nigeria’s monetary policy. It remains to be seen how the Federal Government and the CBN will respond to the NLC’s demands, and whether a resolution can be reached before the scheduled strike action.
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