The average Nigerian is a wary human. There abides an inherent distrust in any venture that involves parting with any form of capital, much less, taxes. To the average Nigerian, the government breaks things – promises, their hearts and the social contract, there is no direct benefit of paying taxes and the unrelenting way that taxes are perpetually demanded and extracted from their friends who are in the tax net is absolutely frightful and unenviable.

To the Government, there is no direct benefit from paying taxes because there are not enough taxes being paid in the first place. Nigerians were shown the light, offered the VAIDS path of redemption – forgiveness from tax sins, but no one wanted to go on a tax pilgrimage.

Taxes are the fuel the Government needs to generate all things nice and lovely for the economy, and so, taxes must be generated. The tax to GDP ratio must increase, as such, taxes must be generated. The tax base must be widened, as such, taxes must be generated. The direct benefit argument between the Government and the average Nigerian will continue, but taxes, must be generated.




As there is much ado about generators, attention is drawn to E-Commerce in Nigeria which is currently worth over $13Billion and estimated by McKinsey to be worth about $75Billion over the next decade.

E-commerce is simply the buying and selling of goods and services online. The ways through which E-commerce transactions can take place include:
Business to Consumer (B2C): The sale of a product or service from a business to a consumer – from Life is Eazi Ltd to Enny Money.

Business to Business (B2B): The sale of a product or service between businesses – sale between Money Go Always Dey Ltd to Life is Eazi Ltd.

Consumer to Business (C2B): The sale from a consumer to a business of something they need or want. E.g Enny Money selling eggs to a fertility business.

Consumer to Consumer (C2C): The sale of goods or services between consumers – sale of hair extensions from Sisi Shakara to Enny Money.

Government to Business (G2B): Paying taxes online for government public goods.

Nigeria’s E-Commerce market is rapidly expanding, a report showed that E-Commerce is growing at a rate of 16.8% yearlyper year globally while in Africa, the E-Commerce space is put at 28.5% making it the fastest growing sector in the world.

Studies show that majority of Nigeria’s internet population of over 70 million people have at some point, purchased an item online. A Broll Shopper Segmentation Report in 2016 showed that 64% of Nigerians surveyed often purchase products online while 83% regularly use the online shopping applications for product searches. 78% of those surveyed believe that they will shop online more in the future.

A major E-Commerce retail platform, Konga, currently has about 25,000 merchants trading with the platform. Other online retail platforms such as Jumia, DealDey, Yudala, PayPorte, Mall for Africa etc. are similarly patronized by thousands of online buyers and utilized by the online sellers.

By all indications, online marketing is gradually being preferred for engaging in purchase and sale of goods and services. All around the globe, businesses are going online.

The prevalence of E-Commerce has irrefutably attracted attention of the wrong kind. The saying goes that “You can never scam an honest man” but the credibility of this statement in Nigeria is totally destroyed by a number of assorted gimmicks that outwit and overwhelm even the most honest and purest at heart. Nevertheless, E-Commerce is here to stay.

E-Commerce offers convenience to the individual visitor, the company, the manufacturer and the consumer. It allows for rapid-fire online marketing and increased online presence of big businesses and MSMEs. It removes the time, stress, physical and geographical boundaries of a traditional marketplace and encourages innovative strategies and healthy competition.

E-Commerce is here, to stay.



Last week, Enny Money ordered 3 bundles of double drawn Croatian hair from Sisi Nene who runs ‘Sisi Nene Hair Dynasty’ on Instagram. Sisi Nene is also to install the hair for her upon delivery. Yesterday, she purchased two soft copy books online from Buuku, a Nigerian website. She also engaged the services of Ragadidi, an online consultant assigned to her by a consulting firm in Kuwait regarding a new startup she’s interested in.

Enny Money while thinking about taxes as she always does, wondered how/if taxes would be paid on her recent E-commerce transactions. She also wondered at the tax implications of the millions of similar E-commerce transactions that surely take place regularly across Nigeria and which often even transcend Nigeria’s borders to countries like the UK, China, Dubai, USA, etc.

Based on the statistics in Episode 2, the sheer amount of taxes continually generated from such E-Commerce transactions would at least be substantial enough to appease the Generators.
In trying to comprehend what taxes should be paid, Companies Income Tax (Please click here to view our TSE discourse on CIT) and Value Added Tax (Please click here to view our TSE discourse on VAT) came to mind, but Enny Money quickly realized many problems with that may hinder effective taxing of E-Commerce transactions that happen inside Nigeria in the first place and those that happen cross-border in the second place.

Firstly, anonymity in secured/encrypted E-commerce transactions will make certain that identifying a footprint in the evil forest at night may be easier than the Nigerian tax authorities identifying the parties to and details/records of E-commerce transactions. In short, Sisi Nene and her customers are as good as invincible to the FIRS. Even if they are visible, how does the FIRS know who buys or installs hair, when the hair is bought or installed, how or when payment is made, the location of the buyers, etc.

Secondly, from the direct benefit argument above, it’s very easy to deduce that Nigerians will not find any reason to be loyal. For a tax like VAT, the E-Commerce Company/website like Buuku is the one obliged to verify transactions, confirm the location of Enny Money and other customers, collect the VAT accruing from them and remit to the FIRS.

A pressing question is what happens when the disloyal companies do not even register as VAT Taxable persons at all nor remit any taxes? Or even better,better still, what happens if they actually collect VAT from their customers and proceed to never remit same? VAIDS has also elapsed so there is no more amnesty, no forgiveness, no waiver of their previous defaults, no love on the streets. Why risk entering the tax net for the purpose of remitting VAT when they can just keep selling books from their cozy online cloud unnoticed?

E-Commerce also has the characteristics of a vagabond. It has no fixed place of abode. No family ties. It is slippery. It cannot be caught or held down to one territory. Our income tax laws hinge payment of tax on a physical fixed base – a place of doing business in Nigeria. Tax authorities have deep issues with administering taxes that already conform to the traditional rule of a fixed base. How possibly/effectively will our tax net catch and hold a fish that has no physical body?

It might also be argued that the number of E-Commerce businesses in Nigeria is exponentially increasing and correspondingly, the number of employees of these businesses are also increasing. E-Commerce might create an avenue for not just CIT and VAT leakages, but also PIT leakages as the fact of such employment and earning of income might not even be detected or provable.

E-Commerce can be confounding. Ever tried following a mosquito with your eyes? No matter how great your vision, you end up losing sight of and location of the mosquito till it resurfaces, if ever, right? So is E-Commerce.



Our CITA has a general provision on taxation of all companies in Section 9 which provides that tax is payable on the profits of any company accruing in, derived from, brought into, or received in Nigeria. This posits that any Company anywhere on the globe – Madagascar, Congo, Argentina, Wakanda etc, that derives or receives profits in Nigeria must pay tax.

Section 13(2)(a) which is a specific provision provides that where a transaction takes place between a Nigerian company and a company that does not have a fixed base in Nigeria, CIT will not accrue even where such company derives profits from Nigeria.

This means that CIT leakages will definitely occur regarding E-Commerce transactions as Nigeria will be deprived of the tax revenue from the foreign company deriving income from Nigeria just because it has it no fixed base. That is, the CITA does not apparently allow for the taxation of cross-border E-Commerce transactions.

To also lay a foundation as regards VAT, exported goods and services are exempt from VAT, imported goods and services are not. VAT is thus a tax on the supply local goods and services on the one hand and the supply of imported goods and services on the other hand. Nigeria also follows the destination principle as regards VAT which means that the obligation to pay VAT arises when imported goods and services are supplied to its destination in Nigeria. It follows that the fact of ‘supply to Nigeria’, is what qualifies imported goods and services to be chargeable to VAT.

The current position of the law on the scope of VAT in Nigeria is in the form of a recently decided case – Gazprom v FIRS, where Gazprom received consultancy and advisory services from some foreign companies and the services were wholly performed outside Nigeria. Gazprom paid their required fees to the foreign companies without remitting VAT to the FIRS on behalf of the foreign companies.

One of Gazprom’s arguments was that the services of the foreign companies were performed outside Nigeria and so the foreign companies were not carrying on business in Nigeria. The Federal High Court stated that the words ‘carrying on business in Nigeria’ is not limited to physical presence of the NRCs in Nigeria, that provision of consultancy services by a Foreign company to a Nigerian company for an agreed consideration translates to carrying on business in Nigeria regardless of whether there is a fixed base. And that VAT is to be charged on all transactions relating to supply of services even where such services are not physically rendered in Nigeria, except for transactions expressly exempted in the VAT Act. A similar decision was made in Vodacom v FIRS.

These decisions answer the question ‘Does the VAT Act allow for the taxation of cross-border E-Commerce transactions?’ in the affirmative. This would mean that the fixed base principle does not apply to E-Commerce transactions between a Nigerian party and a foreign company and all supply of services to a Nigerian company , anywhere in the world, as long as a Nigerian party is involved, is liable to VAT in Nigeria.

Before these cases, the logical inference was that ‘supply’ of a service for which VAT will accrue is related only to services performed ‘inside’ Nigeria by a Non-resident company and not also services performed outside Nigeria by a Non-resident company – given that performing a service is an exercise of skill or labour and, not something that can exactly be wrapped up in a pretty package and delivered overseas, might make the transaction not subject to  VAT in Nigeria.

Before these cases, where the supply of a goods/services did not occur in Nigeria by virtue of an E-Commerce transaction between a Nigerian Company and a non-resident Company, it could have been argued that material circumstances might mean that the transaction is not subject to VAT in Nigeria.

This could happen if Incoterms are used in the transaction or if the transaction is in any way severable such that the part of the contract that will create the obligation of paying VAT will not occur in Nigeria.
Incoterms (International Commercial Terms) set out clearly the respective obligations, rights, risks and benefits of parties as regards delivery of goods.

EXW (Ex Works) is an Incoterm which means the seller/supplier will make the goods available at its premises and as soon as the buyer picks up the goods from the seller’s premises, the seller’s hands are washed clean from the transaction and the buyer is totally responsible for taking the goods to the final destination together with any risks, charge or liabilities that follow.

FCA (Free Carrier) is another Incoterm which makes the seller responsible for the delivery of goods up to a named place of delivery which can be at premises of seller/supplier or at any other named place. The buyer also assumes all risks and costs after the goods have been delivered at the named place.

DDP (Delivered Duty Paid) makes the seller responsible for delivering goods to a named place in the country of the buyer, and for paying all costs in bringing the goods to the destination. If the destination is a Nigeria, VAT will surely accrue.

If Life is Eazi Ltd ordered a MRI machine from General Electric (Boston) and the contract was Ex Works (Boston), GE(Boston) is removed from the picture as soon as it delivers the machine at its factory in Boston.

Life is Eazi Ltd. is bestowed with all risks and responsibility involved in picking up the machine from Boston and taking it to Nigeria. It is obvious that the destination of supply for this transaction is Boston. Ownership and Risk has passed to Life is Eazi Ltd. in Boston and GE(Boston) is not a party to the transaction anymore and it has performed supply.

For Life is Eazi Ltd to pay VAT in Nigeria, it will have to assume the position of both the supplier, supplying its machine to itself in Nigeria and the buyer, receiving its machine from itself which is absolutely ludicrous. It might also be the case that Life is Eazi Ltd. has probably payed VAT in Boston. Based on this material fact, it might have been argued that this is a situation where the rulings of the Federal High Court above ought not apply. But the VAT Act makes no provisions on this matter.

If Karigo Inc, a loading company in Boston was engaged by Life is Eazi Ltd. to carry the MRI machine from GE(Boston) factory and to load it on the carrier plane bringing it to Nigeria, would the supply of this service to Life is Eazi ltd in Boston be deemed VATable in Nigeria? It’s an absurd notion.

In JGC v. FIRS, JGC – a foreign company entered into an offshore contract with Mobil, JGC(Nigeria) also entered into an onshore contract with Mobil. Both contracts were in relation to the same project. The offshore part performed by JGC(foreign) was not performed at all in Nigeria. FIRS argued that JGC(foreign) was liable to tax since it was a party to the contract and since it had a subsidiary with a fixed base in Nigeria – JGC Nigeria.

The court held that the existence of a fixed base or not is a material fact and that JGC(foreign) did not have a fixed base in Nigeria from the material facts so it was not liable to tax in Nigeria. The court also stated that it was important to note that there is absolutely nothing wrong in the parties restructuring its affairs in the way they did and a party may embark on a tax planning exercise so as to limits its tax incidence.

It follows that a contract can be split and also be restructured in the same way above as regards VAT so that the taxable action – Supply, is performed outside Nigeria and the part left to be brought into Nigeria incurs no tax liability. This would have also been a logically arguable case if not for the two decisions above that provide that all supply to a Nigerian party is VAT-able, or if there was a specific provision relating to taxing VAT on E-Commerce transactions in the VAT Act.

The CITA excludes foreign companies from tax where they have no fixed base in Nigeria. The lacuna created by this is not addressed as the CITA fails then to provide for the factor which instead of the fixed base, would determine what would make these companies deriving income from Nigeria taxable.

VAT Act taxes supply of imported goods and services but does not expressly delineate the point at which supply should not/ cannot be taxed. This gives room for judicial decisions to qualify every transaction that is not VAT exempt as supply. There are also items that do not qualify as goods or services, the truth is that we do not know what will happen when such a case goes to court as there is no legislative direction on the matter.

CITA and VATA are thus the old soldiers. It is evident that E-Commerce transactions were far from contemplation of the draftsmen. This is forgivable. It is however imperative that our old soldiers rise up to the occasion that the vibrant, evolving and sprightly E-Commerce demands for the able defense of our tax base.



The question, ‘Is it possible to tax E-Commerce in Nigeria?’ is answered with a definitive ‘Yes’.

It begins with the tax authorities. Many perceive the tax authorities as blood-sucking demons to be avoided at all costs. They would rather go online and be anonymous instead of even embracing amnesty like VAIDS. The revenue-driven tax authorities repel more than attract. Rigid judicial decisions like Gazprom also seem to give the demon wings. There appears to be no respite for taxpayers in the tax net, because of this, those outside the tax net see it as bad energy that needs to stay far away. This shouldn’t be so.

A leaf can also be borrowed from countries like India which adopted the OECD Significant Economic Presence (SEP) recommendation based on Action 1 of the OECD BEPS Actions addressing the Tax challenges of the digital economy. The fixed base requirement is substituted by SEP such that once revenue generated by a foreign company without a fixed base in another country passes a given threshold, or the number of registered users per month/year or volume of digital contracts concluded exceeds a given threshold, the foreign enterprise becomes tax liable to the country from which such revenue is generated.

It has already been established that our tax statutes need to undergo a software upgrade to thrive in the digital economy. The saying also goes ‘to catch a monkey, you have to act like a monkey’ aka our tax authorities need to up their ante. Tax administration has never before been required to be as efficient. Rapid and effective action backed up by advanced laws that envisage all possible occurrences and peculiarities must be undertaken to detect E-commerce companies and transactions and to ensure that requisite taxes are collected and remitted.