FIRS Initiates Automation of Taxation for Online Gaming in Nigeria.

Introduction: In a Public Notice released in October 2022 titled “Real Time Direct Collection of Taxes from Online Gaming Transactions,” the Federal Inland Revenue Service (FIRS) announced the commencement of the automation process for administering taxes on online gaming activities in Nigeria. The primary aim of this automation is to streamline tax compliance for companies involved in online gaming by implementing tax deductions at transaction points and facilitating direct remittance to the Government’s Treasury. The automation process will utilize the Sentinal Payment Gateway and Electronic Solutions (Sentinal Gateway), as stated in the Public Notice. FIRS has mandated all operators providing online gaming services in Nigeria to connect to Sentinal Gateway by December 31, 2022. Non-compliance will result in sanctions for companies failing to adhere to this requirement. Similarly, foreign companies offering online gaming services in Nigeria are obligated to connect to Sentinal Gateway for tax collection and remittance purposes. Our Comments: Despite the presence of multiple gaming legislations at both federal and state levels, there remains an ongoing dispute over whether it is the state or federal government that holds the authority to collect gaming taxes. While some argue that gaming falls under the purview of state legislatures, the Federal Government has been in conflict with state governments over tax collection. To enhance the efficiency of the tax automation process and ensure transparency, an Application Program Interface (API) enabling real-time monitoring of qualifying companies’ activities by FIRS is recommended. Curiously, the government has chosen to implement the automation of online gaming activities using the Sentinal Gateway, a creation of a foreign fintech company (e-Technologies Global Limited), despite the presence of capable indigenous fintech companies in Nigeria. The rationale behind this decision remains unclear and raises questions about the selection process. Conclusion: In a bid to boost revenue from the gaming industry, which has historically contributed minimally to the Federal Government’s revenue target, the government aims to increase its share through the automation of taxation for online gaming activities. This centralized control system aims to tax gaming operators at the initiation of transactions, ensuring immediate remittance to the Government’s treasury. The objective is to eliminate revenue leakages and ensure the imposition of appropriate taxes on every online gaming transaction. For professional advice on Accountancy, Transfer Pricing, Tax, Assurance, Outsourcing, online accounting support, Company Registration, and CAC matters, please contact Sunmola David & CO (Chartered Accountants & Tax Practitioners) at Lagos, Ogun state Nigeria offices, You can also reach us via WhatsApp at +2348038460036.