The Finance Act, 2019 (“the Finance Act”) introduced the concept of significant economic presence (SEP) to expand the scope of Nigerian tax on foreign companies deriving income from their activities in the country which were hitherto not captured in the tax net. The Order provides clarification on what would constitute a SEP for foreign companies doing business, or providing services to customers, in Nigeria, in line with Section 13(2)(c) and (e) of CITA.

Further to our Tax Alert Issue No 5.11, we have reviewed the Order and provided our commentaries thereon below:

1. Determination of SEP for digital activities

The Order provides that a foreign company shall have a SEP in Nigeria in any accounting year, where it

a. derives N25 million annual gross turnover or its equivalent in other currencies from any or combination of the following digital activities:

i. streaming or downloading services of digital contents, including but not limited to movies, videos, music, applications, games and e-books to any person in Nigeria; or

ii. transmission of data collected about Nigerian users which has been generated from such users’ activities on a digital interface including website or mobile applications; or

iii. provision of goods or services other than those under sub-paragraph 5 of the Order, directly or indirectly through a digital platform to Nigeria; or

iv. provision of intermediation services through a digital platform, website or other online applications that link suppliers and customers in Nigeria.

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