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Social media platform Facebook has started informing Nigerian users on the platform of intentions to start charging value added tax (VAT) due to implementation of the tax regime in the country.
TheNewsGuru.com (TNG) reports Nigerians who use Facebook as a means to market or sell their products will start paying VAT, beginning from 1st of January 2022.
With the development, Nigerians will now pay a VAT at the applicable rate of 7.5 percent as the Nigerian government looks to bite a chunk off the ads revenue of the social media giants, not without a burden on Nigerians, though.
The new Facebook tax is in pursuant of the Companies Income Tax (Significant Economic Presence) Order, which is further given impetus by the Finance Bill 2021, which scaled second reading at the Red Chamber of the National Assembly (NASS) on Wednesday.
TNG reports Facebook, owned by Meta, is the biggest social media platform worldwide. There were 27.6 million Facebook users in Nigeria as of March 2020, which accounted for 12.8% of its entire population.
The majority of them were men – 60.9% and people aged 25 to 34 were the largest user group (9.5 million). The highest difference between men and women occurs within people aged 25 to 34, where men lead by 2.3 million.
According to data sieved by TNG from Statista, a leading provider of market and consumer data, advertising accounts for the vast majority of the social network’s revenue.
The social media giants accumulated an impressive 69.66 billion U.S. dollars in annual ad revenues in 2019. In 2020, Facebook generated close to 84.2 billion U.S. dollars in ad revenues, a 21 percent increase from the 2019 figure.
TNG further reports Facebook’s average revenue per user significantly increased from 6.81 U.S. dollars in 2013 to 32.03 U.S. dollars in 2020.
In terms of segments, mobile is the most promising advertising form for the company. In 2018, Facebook’s mobile advertising revenue already accounted for 92 percent of the social network’s total advertising revenue.
Facebook’s mobile advertising revenue grew from an estimate of 13 billion U.S. dollars in 2015 to 50.6 billion U.S. dollars in 2018.
Meanwhile, the CIT order by the FG does not only seek to collect VAT for every ad running on Facebook, beginning from January 2022.
The document imposes tax on any “foreign entity with respect to certain services or digital transactions tax foreign digital service providers offering services to Nigerians and earning revenue in naira.
To be captured into the CIT net beginning from next year as well are other social media platforms, including Twitter, YouTube, LinkedIn, and Instagram that is also owned by Meta, among others.
All foreign digital companies involved in transmitting, emitting, or receiving signals, sounds, messages, images or data of any kind including e-commerce, app stores, and online adverts are also captured into the CIT net.
Also in the coming year, the federal government has proposed to widen the Company Income Tax Act (CITA) to a broad segment of businesses covered by lottery and gaming.
Such businesses include: “betting, game of chance, promotional competition, gambling, wagering, video poker, roulette, craps, bingo, slot or gaming machines and the likes”.