The Federal Inland Revenue Service (FIRS) has intensified efforts to enforce tax compliance among non-resident entities conducting business in Nigeria. This initiative is part of a broader strategy to enhance revenue generation and ensure that foreign businesses contribute their fair share to the Nigerian economy.
Establishment of the Non-Resident Persons’ Tax Office (NRPTO)
In October 2019, the FIRS established the Non-Resident Persons’ Tax Office (NRPTO) to centralize the administration of taxes for non-resident individuals and companies. Effective from January 1, 2020, all non-resident persons liable to tax in Nigeria are required to submit returns, correspondence, or inquiries to the NRPTO, located within the International Tax Department at the FIRS Building in Ikoyi, Lagos .
Enhanced Compliance Measures
The FIRS has implemented several measures to strengthen compliance among non-resident entities:
- Tax Assessments for Shipping Companies: In 2023, the FIRS began issuing intent letters to foreign companies engaged in international shipping business in Nigeria from 2010 to 2019. These companies are now required to provide prior-year filing evidence and Tax Clearance Certificates for the last three years to obtain relevant approvals and permits .
- Digital Services Taxation: Under the Finance Act 2020, non-resident digital service providers are mandated to register for VAT with the FIRS and obtain a Tax Identification Number (TIN) if they make taxable supplies to Nigeria. The FIRS has the authority to appoint these providers as VAT collectors and tax their turnovers .
- Significant Economic Presence (SEP) Rules: The introduction of SEP rules ensures that non-resident companies with substantial economic activities in Nigeria, even without a physical presence, are subject to Nigerian tax laws. This includes the imposition of a minimum tax on income generated in Nigeria .
Implications for Non-Resident Entities
Non-resident entities conducting business in Nigeria are advised to:
- Register with the FIRS: Obtain a TIN and ensure compliance with VAT and income tax obligations.
- Maintain Accurate Records: Keep detailed records of transactions and financial statements to facilitate tax assessments.
- Seek Professional Advice: Consult with tax professionals to navigate the complexities of Nigerian tax laws and ensure compliance.
Failure to comply with these requirements may result in penalties, interest charges, and potential legal actions. The FIRS has emphasized its commitment to enforcing tax compliance and ensuring that all entities operating in Nigeria contribute to the nation’s economic development.
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