The Honourable Minister of Finance, Budget and National Planning, Mrs Zainab Ahmed, recently issued the Companies Income Tax (Significant Economic Presence) Order, 2020 (the Order) to clarify the meaning of Significant Economic Presence (SEP) as contained in Finance Act 2019 (FA19). The Minister issued the Order in line with Section 13(4) of Companies Income Tax Act (CITA), as amended by FA19. The Order has a commencement date of 3 February 2020, although it was made public on 29 May 2020.
FA19 introduced the SEP concept into CITA under Section 13(2) ( c) and (e). SEP qualifies the scope of profits of non-resident/foreign companies (NRCs) that are deemed to be derived from and therefore taxable in Nigeria. Before SEP was introduced, an NRC’s profits were deemed to be derived from Nigeria if the NRC had any of the following: a fixed base in Nigeria, a Nigerian dependent agent empowered to conclude contracts on its behalf, execution of a turnkey project in Nigeria or a related party transaction that was not at arm’s length.
Please click here to explore our detailed newsletter on the meaning of SEP in the Order, the implications for NRCs, administrative concerns as well as other issues. You can also click here to access the Order.