Taxation of the Digital Economy and Significant Economic Presence: The Focus on Nigeria’s Finance ACT 2020

Abstract

Before the enactment of the Finance Act 2020, Non-Resident Companies (NRCs) with digital presence in Nigeria were not subject to taxation until a significant economic presence (SEP) was established. This study aims to carefully assess the validity of imposing digital taxation on NRCs concerning their digital economic activities, following the new fiscal provisions of the Nigeria Finance Act 2020. Using a systematic review methodological approach, the findings of the study reveal that the country stands to benefit from the newly enacted regulation by imposing taxes on previously untaxed digital transactions. It is important to recommend that the taxation of digital economic activities should be reconsidered, shifting from a profit-based to a revenue-based approach to reduce tax evasion strategies. Additionally, creating an enabling environment among industry players to sustain and promote the use of digital platforms is crucial. This is expected to stimulate the revitalization of the economy through increased tax revenues and higher inflows of foreign exchange into the country.