FG Clarifies Online Gaming Tax Policy

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CEM REPORT, FINANCE | A clarification over the controversy surrounding the collection of taxes by the Federal Inland Revenue Service, (FIRS) from registered online gaming operators in the country has been issued by the Federal Government.

In a statement issued by the National Lottery Regulatory Commission (NLRC) the Director-General, Lanre Gbajabiamila, the new tax regime only applies to remote gaming operators operating strictly outside the jurisdiction of Nigeria.

He added that online gaming operators in Nigeria who are duly licensed and tax compliant are not subject to the new tax regime.

The statement read in part: “The attention of the Management of the National Lottery Regulatory Commission (NLRC) has been drawn to several publications on various media platforms purportedly emanating from the Federal Inland Revenue Service (FIRS) with the caption “FIRS commences direct collection of taxes from online gaming operators.”

“These press articles have created uncertainty, panic, and confusion in the Gaming Industry in Nigeria as to the propriety and justification of this new tax regime.

“Therefore, it has become necessary for the NLRC as the Agency created by law to regulate Lottery/Gaming in Nigeria to make the following clarifications: a. Online Gaming Operators in Nigeria who are duly licensed and tax compliant are not subject to the tax referred to in the aforesaid publication; b. The FIRS press release only applies to Remote Gaming Operators operating strictly outside the jurisdiction of Nigeria.

“The NLRC deeply regrets any misconceptions these publications have caused to our esteemed Gaming Operators and other stakeholders in the industry in Nigeria.”

Recall that the Federal Inland Revenue Service (FIRS) in a notice stated that it has commenced the deduction of taxes at transaction points from Online Gaming companies using the Sentinal National Payment Gateway and Electronic Solution.

According to nation’s tax agency’s Chairman, Muhammad Nami, the Sentinal National Payment Gateway is a transaction processing system that enables Integrated Payment Services Providers to deduct taxes at the points of transaction and immediately remit the tax deducted to the government’s treasury.

“The FIRS is automating the administration of tax on online gaming using Sentinal National Payment Gateway and Electronic Solution.

“Sentinal National Payment Gateway is a transaction processing system that enables Integrated Payment Service Providers to deduct taxes at transaction points and remit the tax deducted directly to the government’s treasury.

“The deployment of Sentinal National Payment Gateway will simplify tax compliance for companies engaged in online gaming activities.”

He directed all operators offering online gaming services in Nigeria to connect to the Sentinal National Payment Gateway, deduct tax from online gaming transactions and remit the same directly to the relevant government’s treasury adding that all such connections must be concluded before the end of December, this year.

He described the new approach as an innovation needed to harness technology for improved revenue generation from e-commerce, as well as, for accountability.

He noted that although it was not mandatory for online gaming operators offering online gaming services from outside Nigeria to be incorporated in Nigeria, they were compelled by extant tax laws to connect to the Gateway for the purposes of deducting tax from the gaming transactions of players in Nigeria, and remitting same directly to the government purse.

Also, David Kicks, the CEO of E-Technologies Global Limited, the proprietors of the Sentinal National Payment Gateway expressed excitement over the adoption of the system by the Service.

“Governments in rapidly developing nations are struggling to keep pace with the evolution of eCommerce and the ascent of mobile transactions.

“We are thrilled that the Nigerian Government has made the decision to integrate our Sentinal System, which empowers them to streamline online taxation. By understanding better how the payments ecosystem behaves and evolves, we can drive a paradigm shift towards a point of consumption tax methodology.”

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