The tax authorities in Osun and Delta States have fined Google Nigeria and Meta Platforms, Inc.,150 million dollars and 200 million dollars respectively for alleged non-remittance of Withholding Tax.
The fine is specifically for the Withholding Tax (WHT) allegedly deducted from content creators and entertainers in the two states from 2020 till date.
This is contained in separate letters signed by Messrs Sola Adewunmi, and Solomon Ighrakpata, Executive Chairmen, Osun and Delta States Internal Revenue Service (IRS) respectively.
The letters, also signed by Ademola Odetunde, Chief Operating Officer, LafriquePromedia Ltd., the revenue collection agent for the states, were made available to the News Agency of Nigeria (NAN) in Lagos.
According to Odetunde, LafriquePromedia is also consulting for the IRS of Plateau, which is also facing the same challenge and coming up with similar demand.
He said that the companies were issued a 14-days notice of compliance, effective July 12 and July 19 respectively, from the affected states.
He said that the companies, upon the receipt of those letters, would face the consequences for non-compliance.
Odetunde said that the states were demanding for the payment of 150 million dollars and 200 million dollars respectively, being assessed withholding tax deducted, but not remitted by the companies, at the rate of five per cent to the states.
He said that the revenue or payment were from digital services provided to content creators, practitioners in the entertainment and creative sector within Delta and Osun states.
”By this demands and notices for compliance, we hereby advise your companies to comply with our demands through our revenue agent within the next 14 days.
”We want to bring your attention to the fact that the concept of WHT is a form of advance payment of income tax, which is deductable at source on payment made for certain commercial transactions by Nigerian customers.”
Same must be remitted to the appropriate tax authorities – Federal, by corporate bodies, or State Internal Revenue Service, by individual, enterprises and partnership within 21 days after the end of the month the transaction was made,” he said.
According to him, the companies, as an operator of Social Media Platform within the Osun and Delta states’ digital landscape, are mandated to withhold tax in line with the provisions of the extant law.
Odetunde, who is also a legal practitioner, added that the law required non-resident companies providing digital services in Nigeria to withhold tax.
He said that this also meant that the companies were required by law to collect and remit WHT on digital services provided to customers within the Osun and Delta states’ digital landscape.
He recalled that the concept of withholding tax was introduced to curb tax leakages, gather information of commercial activities being carried out by both resident and non-resident businesses.
Withholding tax is mostly used for collecting tax on non-residents’ income in Nigeria where cross border enforcement is impracticable.
Odetunde said the procedure for implementing withholding tax for non-resident companies operating digital services within Osun and Delta states’ digital landscape included the deduction of such tax from payments for specified activities.
He said the procedure also included services provided to content creators and online practitioners within Osun and Delta states as well as remittances of the tax to the relevant tax authorities through its designated agent.
The legal practitioner also said that the submission of withholding tax schedule to the relevant tax authorities showing details of the beneficiaries such as the name and address of the recipient, was part of the procedure.
It also included the gross amount of the transaction, the amount of the tax and the percentage that had been deducted among other things.
Odetunde said: ”We observed that over the years your companies willfully refused, failed and neglected to remit the withheld tax to the local tax authority for Osun and Delta states, Nigeria.
”Take further notice that, when a non-resident company deducts WHT from payment for digital services provided to customers within Osun and Delta states digital landscape.
”Without remitting same to the local tax authorities, which is Osun and Delta States Internal Revenue Services, a criminal offence has been committed by such non-resident company.”
The law permits us to prosecute the offending non-resident companies and take necessary steps to recover the WHT.”
Odetunde warned the companies to also note that the penalty for non-compliance for companies, including non-resident companies, upon conviction, included a fine of 10 per cent of the amount not deducted or deducted but not remitted.
He said: ”This shall be added thereto, plus interest at the prevailing commercial rate presently at 21 per cent, while the officers of a non-compliant corporate taxpayer may be imprisoned or fined or both, if found guilty of tax crime.”
We do hope that this polite demand notice for compliance will jolt your company to do the needful without further delay.
According to Odetunde, the revenue agent has been writing to the companies since Oct. 13, 2023 in respect of the matter, to no avail.
