Nigeria’s Tax Reform: What Non-Resident Companies Need to Know

Nigeria’s tax landscape is undergoing a transformative shift with the introduction of new tax bills, including the Nigeria Tax Bill (NTB) and the Nigeria Tax Administration Bill (NTAB). These reforms aim to modernize the tax system, simplify compliance, and broaden the tax base through the use of technology and streamlined processes. For Non-Resident Companies (NRCs), these changes present both opportunities and challenges, particularly in areas such as digital services, permanent establishment rules, and minimum tax assessments.  

One of the most significant changes is the expanded taxation framework, which ensures that income, profits, and gains derived from Nigeria are taxable, even without a physical presence. The introduction of the Significant Economic Presence (SEP) Order 2020 further impacts digital service providers and cross-border businesses, requiring them to comply with Nigerian tax laws if they meet specific revenue thresholds.  

Additionally, the updated Permanent Establishment (PE) rules redefine how profits attributable to Nigerian operations are assessed. NRCs must now carefully evaluate their activities in Nigeria to determine if they fall under the new PE criteria, which include maintaining a stock of goods, conducting business through agents, or providing services through employees.  

Another critical development is the introduction of a 4% minimum tax on income generated in Nigeria. While this is lower than the previous 5% deemed profit threshold, it still represents a significant consideration for NRCs, especially those with low profit margins or high operational costs.  

VAT obligations have also been clarified, with NRCs making taxable supplies in Nigeria now required to register for VAT, obtain a Tax Identification Number (TIN), and include VAT on their invoices. These changes, coupled with the potential rollout of an electronic fiscalization system, aim to enhance transparency and compliance.  

For NRCs operating in Nigeria, these reforms underscore the importance of staying informed and proactive. Understanding the new provisions, assessing their impact, and implementing strategies to ensure compliance will be critical to managing tax exposure and avoiding potential penalties.  

Download the full article for a detailed analysis of Nigeria’s tax reforms and actionable insights for Non-Resident Companies.