COMPANIES INCOME TAX (SIGNIFICANT ECONOMIC PRESENCE) ORDER, 2020
Act · Finance
Policy date: 2020-01-01
An Order that defines significant economic presence for non-resident companies providing digital services in Nigeria. It targets foreign digital platforms and service providers. This ensures they pay appropriate corporate income tax.
COMPANIES INCOME TAX (SIGNIFICANT ECONOMIC PRESENCE) ORDER, 2020
What Is This Policy?
An Order that defines what constitutes a significant economic presence in Nigeria for non-resident companies providing digital and technical services, thereby subjecting them to Nigerian corporate income tax.
Who Does It Target?
Non-resident companies providing digital services to Nigerian users Streaming platforms, app stores, and online marketplaces Ride-hailing and digital payment platforms Technical and consulting service providers without a physical presence in Nigeria
What Does It Aim to Achieve?
Close the tax gap arising from the digitisation of the economy, ensure that foreign digital businesses pay a fair share of Nigerian tax, and align Nigeria's tax framework with OECD digital economy principles.
Key Features
Significant Economic Presence Test: A non-resident company has a taxable presence in Nigeria if its annual turnover from Nigerian users exceeds 25 million naira. Covered Services: Applies to digital services including streaming, e-commerce, ride-hailing, advertising, cloud computing, and technical consulting delivered remotely. Tax Obligation: Affected non-resident companies must register with FIRS, file tax returns, and pay Companies Income Tax on profits attributable to Nigeria. Withholding Mechanism: Nigerian businesses paying non-resident digital service providers must withhold tax at source as a compliance backstop.
Current Status
Rollout Stage: Active - FIRS is enforcing registration and filing obligations Coverage: All digital services consumed in Nigeria Beneficiaries: Nigerian treasury and domestic digital businesses competing on a level playing field Funding: Revenue measure - generates corporate income tax for the Federation
How to Access
Non-resident companies meeting the threshold must register with FIRS File annual tax returns with details of Nigeria-sourced income Remit taxes due within prescribed deadlines Application method: Register with the Federal Inland Revenue Service (FIRS) via https://www.firs.gov.ng
Important Terms
Threshold: N25 million annual turnover from Nigerian operations triggers registration Failure to register may lead to assessment and penalties Nigerian businesses have a withholding obligation on payments to non-resident providers
Impact & Metrics
Nigeria became one of the first African countries to extend its tax net to the digital economy, capturing revenue from major global technology platforms.
Official Resources
Website: https://www.firs.gov.ng Contact: Federal Inland Revenue Service (FIRS)
Legal Framework
The Companies Income Tax (Significant Economic Presence) Order 2020 is made under the Companies Income Tax Act (CITA) and the Finance Act 2019 amendments on digital economy taxation. It aligns with the OECD/G20 Base Erosion and Profit Shifting (BEPS) framework (Action 1 on the digital economy), the Pillar One and Pillar Two rules for taxing multinational enterprises, and the Federal Inland Revenue Service (Establishment) Act 2007.