Nigeria: Direct collection of taxes from online gaming transactions
Improving tax compliance with respect to companies providing online gaming services
Improving tax compliance with respect to companies providing online gaming services
The Federal Inland Revenue Service (FIRS) issued a public notice announcing its intention to deploy the “Sentinal National Payment Gateway” that will provide FIRS with the ability to collect taxes on gaming transactions in real time, thereby improving tax compliance with respect to companies providing online gaming services.
Sentinal will allow integrated payment service providers to deduct taxes at transaction points and remit directly to the government’s Treasury. The fee for using Sentinal will be deducted from the payments due to the online gaming operators, which may pass the additional cost to their customers.
FIRS has mandated all Nigerian and non-resident companies (NRCs) offering online gaming services to Nigerian customers, to connect to the gateway no later than 31 December 2022.
KPMG observation
Although Sentinal can be deployed to collect taxes at source in real time from the e-commerce industry generally, FIRS has limited the deployment to online gaming transitions for now. It is possible that this may change in the future. FIRS’ attempt to capture online gaming transactions in the tax net and ensure tax compliance by the companies operating in the industry is unsurprising, given the significant growth and expansion of the industry in recent years.
There are concerns that deploying an application programming interface directly to taxpayers’ corporate accounting systems could be disruptive and may grant FIRS access to non-tax related proprietary information. Therefore, FIRS must ensure that proper regulatory and control measures be in place to secure the confidence of the gaming companies and their customers in the operation of the gateway.
Read an October 2022 report prepared by the KPMG member firm in Nigeria
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