On the 1st of January 2022 the Nigeria’s federal government disclosed that henceforth it would charge offshore companies providing digital services to local customers in Nigeria a six per cent tax on turnover as provided in the 2021 Finance Act.
The Minister of Finance, Budget and National Planning, Mrs. Zainab Ahmed, disclosed this during the public presentation and breakdown of the 2022 budget held in Abuja.
Speaking further on the tax on digital services, she explained that it includes apps, high frequency trading, electronic data storage and online advertising, adding that, “this is introducing turnover tax on a fair and reasonable basis.”
The new policy is contained in Section 30 of the Finance Act which amended the provisions of Section 10, 31 and 14 on VAT obligations for non-resident digital companies.
Ahmed said, “Section 30 of the Finance Act designed to amend section 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.
“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.
“So, Amazon will now collect this payment and remit to FIRS and this is in line with global best practices, we have been missing out on this stream of revenue.
According to her, the new law applies to foreign companies that provide digital services such as apps, high-frequency trading, electronic data storage, online and advertising, among others.
She noted that in line with Section 4 of the Finance Act, non-resident companies are now expected to pay tax at six per cent per cent on their turnover.
How Will This New 6% VAT Affect You as A Digital Marketer?
Speaking on this matter is Mr. Taiwo Oyedele according to Mr. Taiwo Oyedele The introduction of the 6% tax on digital services offered to Nigerians by non-resident companies, implies that Nigerians who visit Amazon, and other e-commerce platforms not resident in Nigeria will pay VAT on items purchased online.
Even though it will increase government revenue, it will also have an implication on the transfer of costs to customers, according to Taiwo Oyedele, Fiscal Policy Partner and Africa Tax Leader at PwC who spoke at the Nigerian Economic Outlook 2022 organized by the King’s Court Parish of the Redeemed Christian Church of God (RCCG), in a webinar themed, “The Finance Act for 2022 – Nigeria Fiscal Guide.”
What You Should Know?
As of 1st January 2022 Facebook introduced the new 7.5% VAT on all digital advertising on it platforms, not just Facebook alone starting from the 1st April 2022 Google will start collect a 7.5% VAT on all on adverts on the Google platform.
So, what does this mean for you as a customer or digital marketer in Nigeria? It means you will have to pay more to place ads or shop on any E-commerce site in Nigeria to bring it home let say you want to advertise a product at 1k daily budget for 30 days which means normally you will be spending 30k for the month but with the new 7.5% VAT digital tax you will need to pay additional 7.5% VAT on the 30k budget you plan to spend on the advert, that automatically means you will be paying 32,250 naira for a 1k daily advert on any social media or digital platform when doing adverts.