- The income realised from the taxation of foreign companies increased by 158.76 per cent from ₦985.27bn collected in 2023
- The foreign companies taxed include Google, Netflix, Amazon, and Facebook
- Foreign companies are taxed 30 per cent of their gross turnover and 7.5 per cent VAT
Taxation is one of the major sources of revenue for the government. It is being imposed on individuals, businesses and companies. The revenue of Nigeria has increased tremendously in 2024 through the taxation of foreign companies receiving profits from their services and residents in Nigeria.
For instance, Google, Netflix, Facebook and other foreign companies operating in Nigeria paid N2.55tn in taxes to the Federal Government in the first half of 2024. This amount represents an increase of 158.76 per cent from ₦985.27bn collected in 2023.
In 2020, the Federal Government had indicated plans to begin tax collection from foreign digital service providers resident in Nigeria and earning profits in naira due to its popularity and acceptance among Nigerians.
Some of these service providers include social media platforms, video streaming sites, and foreign companies that offer downloads of digital content. They are expected to pay digital tax to the Federal Inland Revenue Service (FIRS). Examples are Facebook, Twitter, Netflix, Alibaba, Amazon, etc.
Also, in January 2022, the Federal Government disclosed that following the provisions of the 2021 Finance Act, it would charge offshore companies providing digital services to local customers in Nigeria a 6 per cent tax on their annual turnover.
The reports showed that the foreign companies paid ₦1.72tn as Company Income Tax (CIT) while ₦831.47bn was collected as Value Added Tax (VAT) between January and June 2024. In the Q2 of 2024, Nigeria’s revenue from CIT increased by 87.2 per cent from ₦598.13bn in Q1 to ₦1.12tn in Q2. Also, Nigeria earned N435.73bn from VAT in Q1 and N395.74 in Q2, marking a reduction of N39.99bn.
The tax rates of foreign companies in Nigeria
Section 40 of the Companies Income Tax provides that companies with gross turnover of ₦100m and above are to pay a 30 per cent tax rate. Most foreign companies in Nigeria fall into this category because they have high popularity and acceptance among Nigerians. The Value Added Tax is a 7.5 per cent consumption tax paid when goods are purchased, and services are rendered and borne by the final consumer.
According to the records, the taxes paid by these foreign companies were the highest sum paid by the companies, contributing more than 45.3 per cent to the ₦2.4tn collected in Q2.
Recently, the Minister for Finance and Coordinating Minister of the Economy, Wale Edun, revealed that the Federal Government’s revenue for the Q1 of 2024 increased to ₦9.1tn, more than double the amount recorded in 2023 without increasing taxes.
Tinubu’s tax committee wants food, house rents, public transportation, others to be tax-free
Meanwhile, TheRadar previously wrote about the plan of the fiscal policy and tax reforms committee to remove taxes on food, house rents, public transportation, and others.
This was disclosed by Taiwo Oyedele, the chairman of the Presidential Fiscal Policy and Tax Reforms Committee, who said President Bola Tinubu will soon sign the committee’s proposal to the Federal Government for the removal of taxes on necessities such as food, public transportation, house rents, health and education.
In his statement, he said the purpose of the tax exemption is to spur job creation and boost employment.
