Significant economic presence a newcomer into the nigerian tax laws

A significant economic presence (SEP) is a concept introduced by the Nigerian government in 2018 to broaden the tax base and increase revenue. It is a new category of taxpayers that are not physically present in Nigeria but have a significant economic presence in the country.

The concept of SEP is defined in the Companies Income Tax (Significant Economic Presence) Rules, 2018, which states that a non-resident person shall be deemed to have a significant economic presence in Nigeria if:

  1. The person carries on a trade, profession, or business in Nigeria through a dependent agent;
  2. The person has a fixed establishment in Nigeria;
  3. The person has a permanent establishment in Nigeria;
  4. The person has a significant economic presence in Nigeria through a digital platform or other means.

The following are some key features of a significant economic presence:

  1. Dependent agent: A dependent agent is a person who acts on behalf of a non-resident person and has the authority to conclude contracts or other legally binding acts on behalf of the non-resident person.
  2. Fixed establishment: A fixed establishment is a permanent place of business or a place where the person carries on a trade, profession, or business through a dependent agent.
  3. Permanent establishment: A permanent establishment is a fixed place of business or a place where the person carries on a trade, profession, or business through a dependent agent.
  4. Digital platform: A digital platform refers to a platform that is used to provide goods or services to customers in Nigeria, such as e-commerce platforms, online marketplaces, or digital payment platforms.

The significance of SEP is that it allows the Nigerian government to tax non-resident persons who have a significant economic presence in the country, even if they do not have a physical presence in Nigeria. This is expected to increase tax revenue and broaden the tax base.

Some examples of non-resident persons that may be considered to have a significant economic presence in Nigeria include:

  1. E-commerce companies that sell goods to customers in Nigeria through a digital platform.
  2. Online marketplaces that facilitate transactions between buyers and sellers in Nigeria.
  3. Digital payment platforms that process payments for transactions in Nigeria.
  4. Non-resident companies that have a dependent agent in Nigeria and carry on a trade, profession, or business through that agent.

In conclusion, the concept of significant economic presence is a significant development in Nigerian tax laws, as it allows the government to tax non-resident persons who have a significant economic presence in the country, even if they do not have a physical presence in Nigeria.