TAXATION OF NON-RESIDENT COMPANIES IN THE DIGITAL ECONOMY: A REVIEW OF THE LEGAL FRAMEWORKS AND ENFORCEMENT CHALLENGES IN NIGERIA

Abstract

The stunning digitalization of the world economy has essentially altered the traditional understanding of the business presence and taxation in a manner that has posed a global challenge to the tax-collecting agencies, unlike before. This paper discusses taxation of non-resident companies involved in the digital economy, especially looking at the legal framework of Nigeria and how it is compliant with international best practices. The study examines how the principle of physical presence has changed to an economic substance test, and how digital business models have upset traditional concepts of permanent establishment and source-based taxation. By conducting a thorough review of pertinent case law, statutory provisions, and the comparison with the international jurisdictions, this paper has pointed out the key gaps in the emerging tax regime of digital services in Nigeria and has suggested viable recommendations to reduce taxation failures in the taxation of digital services. This study presents a case that, despite the great efforts Nigeria has been making in aligning its tax regulations to include digital transactions, there is still much more to be done in the areas of enforcement, compliance, and alignment with foreign tax systems. Its results indicate that a moderate strategy of implementing domestic laws, as well as being active in the international tax cooperation program, is necessary to achieve the highest possible revenue collection and still remain competitive in terms of attracting digital investments.