Google has announced that its Nigeria-based advertisers will be charged 7.5% value-added tax (VAT) on all ad placements from April 1, 2022.
“Due to new legislation in Nigeria, starting April 1, 2022, Google will be required to charge 7.5% VAT on all taxable goods and services.” the company disclosed in a legal notice to its users in Nigeria.
Recall that in 2021, the Senate passed the Finance Bill 2021, transmitted to the National Assembly by President Muhammadu Buhari, on December 7, 2021. One of the major highlights of the Bill is the aspect empowering the Federal Inland Revenues Service (FIRS) to assess non-resident firms like Twitter, Meta, Google, and Netflix.
The move, according to Nigeria's Minister of Finance, Budget and Planning, Zainab Ahmed, is part of fiscal reforms to boost revenues and diversify the oil-dependent economy. At around 4.5% of GDP, Nigeria has one of the lowest tax rates in the world and has struggled to increase tax collection from the non-oil sector.
“A direct implication of the 7.5% VAT for organizations inclusive of small and medium scale enterprises is an increase in the cost of marketing. Another concern is the issue of multiple taxations. SMEs have been vocal about how the poor administration of taxation in the country is negatively affecting businesses, killing profits and forcing businesses into bankruptcy.” Dataphyte reported.
What does the 7.5% VAT payment mean?
Value Added Tax is a levy charged on each stage of production of goods and services to the end-user, usually the final buyer.
The implication of the VAT charge is that when you want to place an advertisement on Google with N1000, the money will be inclusive of a 7.5% VAT charge which means you will pay an additional N75 on the advertisement service worth N1000.