THE INTERVENTION OF FINANCE ACT ON TAXATION OF NON-RESIDENT COMPANIES IN NIGERIA: AN APPRAISAL

Abstract

Tax is legal civil responsibility imposed by the government to her citizens, either individuals or corporate bodies with a view to raising funds to finance its responsibilities economically, socially and politically. Non- resident companies are companies or entities that are not registered or incorporated in Nigeria but derives income or profits from persons resident in Nigeria in any kind of business it ventures into. The aim and objective of this work is to discuss the intervention of Finance Act on taxation of non-resident companies in Nigeria. Prior to the Finance Act, the basis for taxation of non-resident companies is that the company must have a fixed base or permanent establishment in Nigeria before the company will be liable to pay companies income tax in Nigeria. The Finance Act 2019 and 2021 amended the Companies Income Tax Act (CITA) by introducing new sections which subjected digital transactions of non-resident companies to tax in Nigeria. The Finance Act provides that the profit of a company other than a Nigerian company from any trade or business shall be deemed to be derived from and taxable in Nigeria where the company transmits, emits or receives signals, sounds, messages, images or data of any kind by cable, radio, electromagnetic systems or any other electronic or wireless apparatus to Nigeria in respect of any activity including electronic commerce, applications store, high frequency trading, electronic data storage, online adverts, participative network platform, online payments and so on, It also extended to furnishing of technical, management, consultancy or professional services outside of Nigeria to a person resident in Nigeria. The widening of the scope of taxation of non-resident companies in Nigeria will no doubt create a lot of tax opportunities for the Federal Inland Revenue Service and government of the Federal Republic of Nigeria. This is because taxing the income of these non- resident companies will generate adequate revenue for the government of the Federal Republic of Nigeria, widen the tax net and move the Nigerian economy from an oil-based economy to a tax based economy. Having seen the provisions of the Act before and after the enactment of the Finance Act and the advantages that are abound in taxing the income and profit of these non –resident companies, this paper went further to make the following recommendations which are adequate implementation of the use of digital technology to ensure tax compliance, recruitment of IT experts, mandatory use of Tax Identification Number (TIN) for Non-Resident Companies, identification of the income of these non-resident companies.