TAXATION OF CROSS-BORDER DIGITAL SERVICES IN NIGERIA: CHALLENGES AND GLOBAL BEST PRACTICES

Abstract

Traditional tax systems that are based on physical presence and territorial nexus have been seriously challenged by the digital economy's explosive growth. Multinational digital companies in Nigeria make a significant amount of money from Nigerian users without having a physical presence, which highlights flaws in the country's tax system. This study examines how cross-border digital services are taxed in Nigeria, emphasizing new changes that are in line with international best practices. Using a doctrinal research technique, the study examines primary sources such as the Nigeria Tax Act 2025, the Companies Income Tax Act, the Finance Acts 2019 and 2020, and subsidiary laws like the Significant Economic Presence Order 2020 as well as secondary sources. The paper found that while Nigeria has made significant progress through the introduction of Significant Economic Presence rules and expanded VAT obligations, challenges persist in profit attribution, definitional clarity, treaty compatibility, and enforcement against non-resident entities. It recommends the development of a dedicated digital tax framework, strengthened intermediary-based enforcement mechanisms, simplified VAT compliance procedures for non-residents, and enhanced technological capacity within tax authorities to ensure effective and sustainable digital taxation.