Tax authorities in Osun and Delta States have fined Google Nigeria and Meta Platforms, Inc. $150 million and $200 million respectively for alleged non-remittance of withholding tax.The fine is specifically for the alleged non-remittance of Withholding Tax (WHT) deducted from content creators and entertainers in the two states from 2020 to the present. This information is detailed in separate letters signed by Messrs. Sola Adewunmi and Solomon Ighrakpata, Executive Chairmen of the Internal Revenue Service (IRS) in Osun and Delta States, respectively.
The letters, also signed by Ademola Odetunde, Chief Operating Officer of LafriquePromedia Ltd., the revenue collection agent for the states, were provided to the News Agency of Nigeria (NAN) in Lagos. Odetunde noted that LafriquePromedia is also advising the IRS of Plateau State, which is facing similar issues and issuing comparable demands. He stated that the companies received a 14-day compliance notice, effective July 12 and July 19 respectively, from the affected states. Failure to comply with these notices would result in consequences.
Odetunde explained that the states are demanding $150 million and $200 million respectively for withholding tax that was deducted but not remitted by the companies, calculated at a rate of five percent. This tax pertains to digital services provided to content creators and entertainment professionals in Delta and Osun states.
He advised the companies to comply with these demands through the revenue agent within the next 14 days. He emphasized that Withholding Tax (WHT) serves as an advance payment of income tax, deductible at the source for certain commercial transactions by Nigerian customers. This tax must be remitted to the appropriate authorities—Federal for corporate bodies and State Internal Revenue Service for individuals, enterprises, and partnerships—within 21 days after the end of the transaction month.
Odetunde, also a legal practitioner, stressed that as operators of social media platforms within Osun and Delta states, the companies are required to withhold and remit tax in accordance with the law. Non-resident companies providing digital services in Nigeria must withhold and remit WHT on such services to customers in these states. He noted that withholding tax was introduced to prevent tax evasion and to collect information on commercial activities conducted by both resident and non-resident businesses. Withholding tax is primarily used in Nigeria to collect taxes from non-residents where cross-border enforcement is challenging.
Odetunde explained that the process for implementing withholding tax for non-resident companies providing digital services in Osun and Delta states involves deducting the tax from payments for specified activities. This includes services rendered to content creators and online practitioners in these states and ensuring the tax is remitted to the relevant authorities through the designated agent.
The procedure also requires submitting a withholding tax schedule to the tax authorities, detailing the beneficiaries, transaction amounts, the tax amount, and the percentage deducted.
Odetunde said, “We have observed that over the years, your companies have willfully failed to remit the withheld tax to the local tax authorities in Osun and Delta states, Nigeria.
“Please be aware that if a non-resident company deducts WHT from payments for digital services provided to customers in Osun and Delta states but fails to remit it to the local tax authorities, it constitutes a criminal offense. The law allows us to prosecute and take steps to recover the withheld tax.”
He warned that penalties for non-compliance, including for non-resident companies, could involve a fine of 10 percent of the undeducted or unremitted amount, plus interest at the prevailing commercial rate of 21 percent. Additionally, officers of non-compliant companies could face imprisonment or fines if found guilty of tax offenses.
Odetunde expressed hope that this notice would prompt the companies to comply without further delay. He also noted that the revenue agent has been contacting the companies since October 13, 2023, without response.
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