The Minister of Finance, Budget and National Planning has recently issued the Companies Income Tax Order, 2020, which was effective from 3 February 2020. But, it was made public on 29 May 2020. The Order clarifies the meaning of Significant Economic Presence (SEP) as contained in the Finance Act 2019. Before SEP was introduced, a Non-resident company’s (NRC) profits were deemed to be derived from Nigeria if that company had a fixed base in Nigeria, a Nigerian dependent agent empowered to conclude contracts on its behalf, execution of a turnkey project in Nigeria or a related party transaction, which is not at arm’s length.
However, the Chairman of the Federal Inland Revenue Service (FIRS) recently disclosed that the FIRS would soon begin collection of Value Added Tax (VAT) on online transactions. According to the Chairman, the FIRS plans to start directing banks in Nigeria to be the collecting agents for VAT on online transactions for purchase of goods and services.
