NIGERIA LAW AND PRACTICE Contributed by: Chinyerugo Ugoji, Tiwalola Osazuwa, Rebecca Ebokpo, Jibrin Dasun, Peretimi Akinmodun, Onyinyechi Chima and Princess Otah, ǼLEX
financial relations, which the tax authority deems artificial or fictitious; or • 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, application store, high frequency trading, electronic data storage, online adverts, participative network plat - forms or online payments), to the extent that the company has “significant economic pres - ence” in Nigeria. The Minister of Finance issued an order specify - ing when foreign companies would be deemed to have “significant economic presence” in Nige - ria, under which a foreign company that has a Nigerian domain name, registers a website in Nigeria, engages purposefully and consistently with Nigerian users through a digital platform targeting the Nigerian market (including pricing or payment in NGN) or has a turnover of over NGN25 million (or its equivalent in other curren - cies) from the provision of all forms of digital ser - vices to Nigerian residents would be deemed to have significant economic presence in Nigeria. The CIT rate is 30%. However, small businesses with a turnover of less than NGN25 million are exempt from paying CIT, while medium-sized companies with a turnover of between NGN25 million and NGN100 million pay CIT at a reduced rate of 20%. There is also a tertiary education tax of 3% on the same tax base as CIT. Nigeria has refused to agree to the “two-pillar solution” introduced by the Organisation for Eco - nomic Co-operation and Development (OECD), but has signed the following instruments:
• the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting; • the Multilateral Competent Authority Agree - ment for the Common Reporting Standard; and • the Multilateral Competent Authority Agree - ment for the Automatic Exchange of Country- by-Country Reports. Hydrocarbon Tax/Petroleum Profits Tax (PPT) In addition to CIT, a hydrocarbon tax of 15% is payable for operations in onshore and shal - low waters pursuant to a Petroleum Prospect - ing Licence (PPL), and 30% in respect of opera - tions in onshore and shallow waters pursuant to a Petroleum Mining Lease (PML). Companies that opt not to convert their Oil Prospecting Licence (OPL) or Oil Mining Lease (OML) to a PPL or PML, respectfully, will con - tinue to be taxed under the Petroleum Profits Tax Act until their OPL or OML expires. PPT rates vary between 50% and 85%, depending on the nature of the company’s operations. A special PPT rate of 65.75% applies when a company has not yet started the sale or bulk disposal of chargeable oil under a programme of continuous production and all pre-production capitalised costs have not been fully amortised. Notable Taxes and Levies The following notable taxes and levies are imposed on companies. • An information technology tax of 1% of profits before tax is payable by telecommu - nications companies, internet service pro - viders, pension managers and custodians, and financial institutions with a turnover of NGN100 million and above. When paid, the
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