Taxation for Nigerian bloggers by Ugodre Obi-Chukwu

                            

Folly Limited is a gossip news website based in Nigeria and owned by a student in a local university. He gets a lot of visitors to his website and has recently been approached by advertisers.

His advertisers are both local and foreign-based, all jostling to have space on his website. Folly Limited wants to be tax compliant. So he wants to know who to charge Value Added Tax and who can deduct withholding tax from his invoice.

Blogging is increasingly becoming one of the easiest forms of incremental revenue for a lot of Nigerians. Bloggers can either work on a full-time or part-time basis, depending on the type of blog they maintain and how often they need to update and keep it relevant.

Different types of blogs also exist depending on the niche that it serves. There are business blogs, entertainment blogs, sports blogs and those meant for politics. As mentioned, most bloggers are also in it for the money.

Bloggers can earn from  as  little as N10, 000 a month to as much as N2m a month. It all depends on how many visitors you attract and how much advertisers are willing to pay for adverts on your blog.

Since adverts are revenue-generating businesses, it’s not uncommon for bloggers to come across issues that border on taxation. A few bloggers have reached out to Nairametrics about this subject and we thought to share our opinion on the subject matter.

So let’s discuss taxation for blogging.

• Local advertisers

For most website owners who run advertisement, advert revenues collected from local advertisers should include a VAT payment of five per cent of the cost of advertising.

For every N100 you charge, you must include a five per cent VAT to make your invoice N105. If you do not issue a physical invoice but have a platform where they can deposit money while you amortize payment as their ads are displayed, then make sure your ad rates include five per cent VAT.

Withholding tax

Now this can be tricky. Withholding tax by definition is deducted on contract of purchases or services represented by invoices. In addition, the law also clearly stipulates that the service or purchase will be delivered in the location of the client thus not in the ordinary course of business.

For example, if you go to a supermarket to buy stationery, you pay the full amount inclusive of VAT but you don’t deduct withholding tax. This is an example of selling a product in the ordinary course of business.

If you however, get the supermarket to supply the product to your company under a supply contract, then you should deduct withholding tax. That transaction is viewed as not being in the ordinary course of business.

Based on the illustration above, companies who pay you to advertise on your website should not deduct withholding from your invoice except you are under a contract. This is because the adverts are placed on your website in the ordinary course of business.

The mistake most advertisers make is that they deduct withholding tax from your fee because they ask you for an invoice. We have also been a victim of that too.

The right thing to do would have been to issue them a receipt (but you can’t issue receipt without payment). The problem also is that they ask blog owners to issue them an invoice which they use to process an approval for disbursement.

One solution however, will be to issue them a debit note or a bespoke rate card that spells out the specific advert rate that they have quoted for and your bank details.

If you are circumspect about what to do and don’t want to pay VAT, then we suggest that you avoid signing contracts with advertisers to place adverts on your website.

Instead, send them your advert rates along with your bank details. Better still adopt a solution that  sites like Nairaland use, where advert placements are paid upfront and advertisers are provided with analytics on how the adverts are being utilised as well as performance metrics.

If your invoice has been deducted for withholding tax,  our candid opinion will be for bloggers to disregard the WHT and only give them value for the cash paid (which has been deducted for VAT).

 For better clarity, if an advert rate for a week is N105k (five per cent VAT inclusive) and the advertiser pays you N95, 000 (assuming they deducted WHT of 10 per cent). We suggest you only give them advert value that covers N90, 047 only and pay the Federal Inland Revenue Service VAT of N4, 053. That way, you do not bear the cost of the N10, 000 erroneously deducted by the advertiser.

Note: A simple way to determine your Net Income (less VAT) from a gross amount (which includes VAT) is to divide the Amount received by 1.05. For example, N105/1.05=N100. In this case N95, 000/1.05= N90, 047.

• VAT on foreign advertisers

VAT is currently exempt on all exports from Nigeria. This means that foreign advertisers should not be charged an additional five per cent VAT whenever you bill them or structure your advert tables to suit foreign clients.

You are also not obligated to pay the FIRS VAT for such services or products especially if it is earned abroad. This applies to advert income from Google Adsense, foreign affiliate marketers etc. If your advert agency is Google and because Google is not registered in Nigeria as an ad agency or client, you cannot charge them VAT.

What do you think about this article? Send us an email info@nairametrics.com

- PUNCH.