The Companies Income Tax (Significant Economic Presence) Order, 2020 (SEP Order) was issued by the Minister of Finance, Budget, and Financial Planning to clarify when Non-resident Companies (NRCs) providing digital services in Nigeria become taxable entities. Under this order, NRCs that meet specific conditions are liable to pay Companies Income Tax in Nigeria.
Key Takeaways from the SEP Order
- Which NRCs are Taxable?
NRCs providing digital services are subject to tax if they derive a gross turnover or income of 25 million naira or its equivalent in other currencies from services such as:
– Streaming or downloading digital content, including movies, music, and videos.
– Transmitting data collected about Nigerian users from their activities on a digital interface.
– Providing goods and services through a digital platform.
– Offering intermediation services via a digital platform.
– Engaging in activities through connected persons, such as business associates involved in the management, control, or capital of the NRC.
- Criteria for Taxation
An NRC is also considered taxable if it:
– Uses a domain name containing “.ng” or registers a website address in Nigeria.
– Purposefully and consistently interacts with persons in Nigeria by customising its digital platform to target Nigerian users, including reflecting prices in naira.
– Provide technical, professional, management, or consultancy services and earn any income from a Nigerian resident or a company’s fixed base or agent located in Nigeria.
- Tax Exemptions
NRCs from countries covered by tax treaties or multilateral tax agreements with Nigeria will be treated in accordance with those agreements. If such treaties exempt NRCs from taxation, the SEP Order will not apply.
Additionally, an NRC will not be subject to tax if the payment is made:
– To an employee under a contract of employment.
– For teaching at or for an educational institution.
– By a foreign fixed base of a Nigerian company.
The SEP Order represents a significant step in ensuring that Non-resident Companies providing digital services in Nigeria contribute their fair share to the tax system. Complying with these regulations can be complex, but it is critical for businesses operating in Nigeria.
You may contact us by sending an email to: lawyers@syntaxlaw.com
#nigerianbusiness #lagos #nigeria #investment #syntaxlp #simplifyingthelaw #nigerianlawyer #nigerianlaw firm #entrepreneurship
Syntax Legal Practitioners 
This guide offers insightful clarity on the SEP order in Nigeria, crucial for foreign companies navigating economic regulations. A valuable resource for informed decision-making.
LikeLike