Foreign companies such as Google, Netflix, and Facebook that operate in Nigeria have reportedly paid over N1.98 trillion (Nigerian Naira) in taxes to the Federal Government within a span of 15 months, according to data from the National Bureau of Statistics. This tax amount includes both Company Income Tax (CIT) and Value Added Tax (VAT).
CIT is a 30% tax on the profit of companies, while VAT is a 7.5% consumption tax paid when goods are purchased or services are rendered and borne by the final consumer.
In 2020, the Nigerian government introduced regulations to tax foreign digital service providers offering services to Nigerians and earning revenue in Nigerian Naira. These companies, which include video streaming sites, social media platforms, and others, were required to pay digital taxes to the Federal Inland Revenue Service (FIRS).
The taxation of digital services aimed to ensure that foreign companies with a significant economic presence in Nigeria contribute to the country’s tax revenue. The taxation model included turnover taxes for offshore companies providing digital services to local customers.
The digital tax implementation reflects a broader trend globally, as countries seek to capture revenue from digital services and e-commerce. However, enforcing compliance can be challenging, especially when companies operate across international borders.
The tax revenue generated from foreign digital companies in Nigeria could contribute significantly to the government’s budget and economic development efforts.