Nigeria’s new tax rules will widen the scope of taxation on foreign-linked income through a “force of attraction” principle, while excluding most remittances and offshore earnings of citizens abroad.
Nigeria’s new tax rules are set to bring more foreign-linked income into the country’s tax net, even as officials maintain that remittances and offshore earnings of Nigerians abroad remain largely outside the scope of taxation. Tax experts at Andersen say a key feature of the reform is the introduction of the “force of attraction” rule, which broadens how income linked to Nigeria can be taxed.
“The ‘force of attraction’ rule effectively widens Nigeria’s reach over non-resident businesses, shifting the focus from where activities happen to who is behind them within a group,” said Abisola Kazeem and Jesuloba Eyitayo in Andersen’s recent tax digest. In practical terms, this means that once a company establishes a meaningful economic presence in Nigeria, other related income connected to that presence could also be brought into the tax net.
The reform marks a departure from the traditional model where taxation depended largely on physical presence, aligning instead with global standards led by the Organisation for Economic Co-operation and Development (OECD) under its Base Erosion and Profit Shifting initiatives. Experts say the approach is designed to ensure countries can tax value created within their economies, particularly in an increasingly digital global marketplace.
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