Home Community Insights Taxation of Digital Activities in Nigeria: A Panacea for Generating Revenue

Taxation of Digital Activities in Nigeria: A Panacea for Generating Revenue

Taxation of Digital Activities in Nigeria: A Panacea for Generating Revenue

The importance of Technology in the 21st century cannot be overemphasized. The whole world has now become a global village through Information Communication Technology. Our traditional methods of doing many things are now digitalized. Today, we have Digital Currency such as Bitcoin, online markets such as Jumia where buying and selling take place without physical presence, banking transactions are not excluded from digitalization as you can now bank safely on your mobile phone from the comfort of your bed room. All it requires is to have an Android phone and Data to experience the above, hence the need for our various Revenue laws to be in tandem with the current situations.

The Economy of many countries of the world has become Digital Economy and Nigeria is not left out. In 2018, the Nigerian Investment Promotion Commission put it that Nigerian digital economy is expected to generate $88 billion and create three million jobs by the end of 2021[i].

However, it was practically impossible for Nigeria to tax the enormous income that the digital economy was generating, hence the enactment of Finance Act 2019 which amended various tax laws in Nigeria. This has brought the country into group of countries with taxation of digital activities.

Tekedia Mini-MBA edition 14 (June 3 – Sept 2, 2024) begins registrations; get massive discounts with early registration here.

Tekedia AI in Business Masterclass opens registrations here.

Join Tekedia Capital Syndicate and invest in Africa’s finest startups here.

Formerly, the general rule under the Nigerian tax laws for taxing income of foreign companies in a given jurisdiction is by establishing that the entity has a taxable presence or has a permanent establishment (PE) in Nigeria. This is based on the provision of the section 13 of the Companies Income Tax Act, 2007.

It has been aptly argued from some quarters, that  the above position is not in tune with the current advancement in Digital Activities and that the reality remains that in Digital Economy, companies can make money without a significant physical presence, and, no significant means or very little tax for the government. It can be humbly submitted that a lot of revenue would be lost without taxing the digital economy.

In view of the challenges faced by the Tax Authorities in taxing foreign enterprises without Permanent Establishment in Nigeria, the Finance Act 2019 amended various sections of the Companies Income Tax Act 2007 to wit: Foreign companies with Significant Economic Presence ( SEP). SEP is a principle initiated by Organisation for Economic Cooperation and Development (OECD) to finding last solution to this tax solution known as Base Erosion and Profit Shifting (BEPS) a form of corporate tax planning strategy used by multinationals to shift profits from higher – tax jurisdiction to lower- tax jurisdictions, thus eroding the tax base of the higher- tax jurisdiction and it is a form of tax avoidance which thrives on the gaps and mismatch between different tax system.

Furthermore, Value Added Tax Act has equally been amended by the Finance Act, 2019 in section 46 to widening the scope of Value Added Tax to include intangible goods such as digital products and services rendered online to persons in Nigeria irrespective of the resident status of the service provider. FIRS Circular on the Implementation of the Value Added Tax Provisions in the Finance Act 2019 issued out on the 29th April 2020 has clarifies the definition of goods and services in the Act. As it relates to goods, the Circular provides that VAT is chargeable on goods which include property (tangible or intangible)…while in relation to services, the Circular indicates that VAT is chargeable on services:..is rendered remotely, online, or by other virtual means to Nigerian residents of persons in Nigeria. The Circular equally made it mandatory for Non Residents Companies to register for VAT.

Also, Stamp Duties Act has been amended by the Finance Act in section 89 to include payment of Stamp duties on Electronic Documents. To this writer, this is in tune with the provision of Evidence Act, 2011 on admissibility of Electronic in court.


The taxation of Digital Activities in Nigeria through the enactment of Finance Act, 2019 is a right step taken in the right time. Revenue generation for the government has increased tremendously and this would the government the leeway to provide social amenities for the betterment of the citizens.


[i] Ogochukwu Isiadinso and Emmanuel Omoju, ‘’Nigerian: Taxation of Nigeria’s Digital Economy: Challenges and Prospects” Mondaq(30 May 2019)< www.mondaq.com/nigeria/tax-authorities/810276/taxation-of-nigeria39s-digital-economy-challenges-and-prospects >  accessed  Tuesday, September 22, 2020.

ii International Collaboration to End Tax  Avoidance< www.oecd.org/tax/beps/>


Timothy Olamide writes from the Faculty of Law and can be reached via [email protected]

No posts to display

Post Comment

Please enter your comment!
Please enter your name here