Nigeria's New IP And Intangibles Tax Rules — What Startups Need To Know (Tax And Tech Series 1)

Nigeria's new tax regime fundamentally reshapes how intellectual property (IP) and digital assets are taxed. If your startup earns revenue from software, data, digital platforms, or licensed technology used in Nigeria, the Nigeria Tax Act (NTA) 2025 creates new obligations you can't afford to ignore.

This edition of Tech Brief by TALP is the first instalment of our "Tax and Tech" series, where we break down what has changed and how it affects founders, investors, creators, and global digital service providers.

How the NTA 2025 Taxes Digital and IP Revenue

The NTA broadens Nigeria's tax base by bringing income from digital activity and intangible assets within the tax net whenever their value is created, exercised, or controlled in Nigeria. This approach relies on the concept of the "deemed location" of intangible assets. Under this rule, tax exposure no longer depends solely on where an asset is legally registered but on where its economic benefits are actually realised.

As a result, royalties, license fees, income from virtual/digital assets, and payments for the use of software, datasets, algorithms, patents, or other intangible property are taxable in Nigeria whenever they are exploited or controlled by an individual or entity resident in Nigeria. In practical terms, your revenue becomes taxable in Nigeria if you earn income from:

• APIs used by Nigerian customers
• Monetised content consumed by Nigerians
• SaaS subscriptions used by Nigerians
• Software licensed to a Nigerian
• IP you control in Nigeria
• Virtual asset transactions involving Nigerian users

Significant Economic Presence (SEP) Now Targets Only Digital Services

The NTA 2025 introduces an important shift in how Nigeria applies the "Significant Economic Presence" (SEP) rule to non-resident companies. When SEP was first introduced under the Finance Act 2019, and later clarified by the CIT (Significant Economic Presence) Order 2020, it had a wide reach. It applied not only to global digital platforms, but also to offshore providers of professional, consultancy, management, and technical services (PCMT). This meant that a non-resident lawyer, engineer, analyst, or consultant advising a Nigerian client from London, Dubai, or anywhere else could become liable to Nigerian Companies Income Tax (CIT) once the SEP threshold was crossed.

The NTA 2025 re-focuses SEP strictly on non-resident companies that provide digital services to Nigerian users. Cross-border PCMT services no longer fall under the SEP rules; they are now dealt with through withholding tax (WHT) or the 4% minimum tax on Nigeria-sourced income.

Under the new regime, a non-resident company will have SEP, and therefore become liable to CIT on attributable profits, only where it earns N25 million or more in a year from digital activities targeted at, consumed by, or monetised through Nigerian users. (This threshold remains operative under the existing 2020 SEP Order, pending any new Ministerial regulations.)

The updated SEP framework primarily affects foreign companies operating digital models, such as:

• SaaS and cloud-based platforms
• Streaming services
• E-commerce and online marketplaces
• Digital advertising platforms
• Data hosting or transmission services
• App stores and payment platforms
• Digital content platforms
• Global e-learning services, and
• Social networks earning advertising revenue from Nigerian traffic.

Since PCMT services no longer fall under SEP, non-resident providers do not incur CIT through that route. Instead:

• A 10% WHT applies to fees for offshore services (treated as final tax).
• Where WHT does not apply, a 4% tax is imposed on total Nigeria-sourced income.
• For labelled startups, the WHT rate is reduced to 5%, lowering the cost of engaging foreign expertise.

Stronger Value Added Tax (VAT) Obligations for Non-Resident Companies (NRCs)

The NTA 2025 strengthens VAT rules for non-resident companies (NRCs) to ensure that services consumed in Nigeria are taxed, regardless of where the supplier operates from. The guiding principle is simple: if the service is consumed in Nigeria, VAT is due in Nigeria.

Key VAT rules to note:

7. Digital services supplied directly to final consumers: Where a non-resident company supplies digital services to an individual or a business that is not VAT-registered, it must register with the Nigeria Revenue Service (NRS) and remit the 7.5% VAT charged to that customer.
8. Services procured by VAT-registered Nigerian businesses: When a Nigerian VAT-registered business obtains a taxable service from a foreign supplier, the reverse charge mechanism applies. The Nigerian business must self-account for 7.5% VAT and remit it directly to the NRS.
9. Responsibilities of digital platforms: Operators of digital platforms, including e-commerce marketplaces, app stores, and payment aggregators, may be required to collect and remit VAT on the full value of the transaction, not just on their commission or facilitation fee.
10. VAT relief for digital exporters: Nigerian companies exporting digital products such as software or other IP continue to enjoy zero-rated (0%) VAT. They may charge no VAT to foreign clients while retaining the right to recover input VAT, improving margins on digital exports.
11. Compliance expectations for foreign and local businesses: Foreign suppliers must now navigate Nigeria's tax registration requirements to remain compliant. Nigerian businesses, for their part, must stay vigilant: if a foreign supplier fails to register, the Nigerian recipient remains responsible for applying the reverse charge.

Capital Gains Tax (CGT) on IP and Digital Assets

The NTA 2025 introduces significant changes to Capital Gains Tax, directly impacting the disposal and transfer of intellectual property (IP) and digital assets. It expands the definition of "chargeable assets" to clearly include intangible property, incorporeal rights, and digital or virtual assets.

For companies, the CGT rate on the sale or assignment of IP assets has increased from 10% to 30%, effectively aligning CGT with the standard Companies Income Tax rate. Small companies, however, continue to enjoy 0% CGT rate. For individuals, CGT has been fully redesigned: gains are now taxed at the progressive rates applicable to Personal Income Tax, up to a maximum of 25%.

Under the new rules, an NRC that disposes of an IP asset or an interest in a software will be subject to CGT if the asset is deemed located in Nigeria. Additionally, the disposal or transfer of IP during corporate restructuring is treated as a CGT-triggering event, with tax calculated at the fair market value of the IP at the time of transfer. This measure reinforces anti–profit shifting rules.

A New Tax Footprint for the Digital Economy

The era of taxing companies based solely on their place of registration is over. The NTA 2025 repositions Nigeria's tax system around where value is created and where digital services are consumed. This shift affects:

• Foreign tech companies earning from Nigerian users
• Local startups holding or exploiting IP offshore
• Digital platforms, marketplaces, SaaS providers, and content businesses
• Any enterprise generating revenue from Nigeria without a physical presence

If your business operates in or earns from Nigeria, now is the time to reassess your tax exposure, evaluate your structures, and ensure your IP, VAT, CGT, and SEP positions comply with the new regime.

To view original Tope Adebayo article, please click here.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.