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The Nigerian Entertainment Industry is a vital part of the country’s economy and culture, and it is subject to taxation. One of the main drivers of Nigeria’s economy is the entertainment and media sector. Nigeria also offers a sizable market for media and entertainment due to its population of over 200 million. Nigeria has established itself as the center of African media and entertainment as a result of the wealth of talent and inventiveness that exists there.
The rising popularity of Afrobeats and the presence of foreign entities like Netflix have led to increased investments in the Nigerian film and music industries[i]. Notably, Netflix announced that it has invested more than US$23 million over a seven-year period in the Nigerian film industry, supporting more than 250 locally licensed titles and generating 5,140 employees. Significant economic gains have resulted from these investments, including US$2.6 million in tax revenue, US$39 million in GDP, and UD$34 million in household income[ii].
Nigeria’s film, music, and entertainment sectors have grown significantly over the last three years, up 27.46%, according to current industry data [iii]. Nigerian artists, be they performers, visual artists, or musicians, have a variety of tax responsibilities. Their artistic income is taxed, and this includes royalties, endorsements, artwork sales, and performance income[iv]. In order to receive a Tax Identification Number (TIN), artists must register with the appropriate tax authorities.
With the film industry alone bringing in over $600 million a year, the entertainment sector has made significant economic growth contributions[v]. According to Section 24(f) of the 1999 Constitution, every Nigerian citizen is required to accurately disclose their income and pay their taxes on time (1999 CFRN)[vi]. Every African is obligated under the African Charter to labor to the best of their abilities and competence and to pay taxes as required by law in the best interests of the community[vii]. States must guarantee that tax rules are applied equally to men and women in order to prevent tax discrimination against women, according to the Africa Charter on Human and People’s Rights Protocol.
TAX OBLIGATIONS ON ARTISTS, PRODUCERS, AND DISTRIBUTORS.
There are many different forms of taxation in the entertainment sector. When an artist performs in person, either in music or theatre, you will typically be required to pay a gate charge or buy a ticket before you are allowed to enter the event hall. Once certain incidental expenses have been subtracted from the entrance charge total, any remaining profit is liable to income tax. When money is sprayed on an artist, the tax to be imposed on this money will be company income Tax, as it also constitutes income for the musician, either individually or through his group, which may be an incorporated entity[viii]. Artists can work as musicians, theatrical professionals, or corporate entities[ix].
Whether they are creating music, films, or other artistic works, producers are essential to the creative process. Taxes apply to earnings from the creation and distribution of creative content. To precisely determine their taxable income, producers must keep thorough records of all of their expenses, including marketing charges, distribution fees, and production costs.
Distributors are in charge of bringing innovative material into the hands of customers, whether via online or offline distribution methods. Value-added tax (VAT) on sales of goods and services is one tax that distributors may be liable to. The Federal Inland Revenue Service (FIRS) requires entertainers to register for VAT, and they also need to remit the correct amount of tax on taxable transactions[x]. Artists, producers, and distributors should investigate the various tax deductions and incentives that are available to them in order to reduce their overall tax obligations. For tax purposes, for instance, costs directly associated with the creation, marketing, and distribution of creative content may be deductible.
TAXES APPLICABLE IN THE ENTERTAINMENT INDUSTRY.
Value-Added Tax (VAT): On taxable transactions, entertainers who sell products like records, merchandise, or event tickets are liable to pay VAT[xi]. They must pay the correct amount of tax on sales of goods and services and register for VAT with the Federal Inland Revenue Service (FIRS).
Withholding Tax: Performance fees, royalties, and endorsements are just a few of the payments that entertainers may get that are subject to withholding tax[xii]. It is the duty of event planners, record companies, and other organizations paying performers to withhold tax at the appropriate rates and submit it to the appropriate tax authorities on the performers’ behalf.
Tax Returns and Compliance: Performers must submit yearly tax returns to the appropriate tax authorities, including their earnings and out-of-pocket costs for the year.
Tax planning techniques can help entertainers lawfully reduce their tax obligations. Certain costs, like production costs, travel expenses, promotional costs, and professional fees, that they incur while providing entertainment may be deductible.
In conclusion, Nigeria’s entertainment industry is a thriving and dynamic one that makes a substantial contribution to both the cultural identity and economic development of the nation. But as this industry grows and changes, it also needs to understand its tax obligations. Although the industry has frequently struggled to comply with tax laws because of a variety of issues, including cash-based transactions and informal structures, the government and industry stakeholders must work together to simplify tax laws, promote transparency, and educate artists, distributors, and producers about their tax responsibilities in order to create a more robust and successful entertainment industry.
[i] Okoeguale, A., 2022. Nature of Nigerian Creative Economy: A Review of the Nigerian Film and Music Industry. Journal of African Film & Diaspora Studies (JAFDIS), 5(4).
[ii] https://africapractice.com/wp-content/uploads/2023/04/NetflixReport-11April-DIGITALfile-1.pdf accessed on the 4th of June, 2023
[iii] Omoera, O.S., 2024. Audience reception of Benin cinema in Nigeria: Empirical findings and implications for Nollywood. Cambridge Scholars Publishing.
[iv] Adekoya, A.A., Olaoye, A. and Lawal, A., 2020. Informal sector and tax compliance in Nigeria-challenges and opportunities. International Journal of Emerging Trends in Social Sciences, 8(2), pp.57-69.
[v] Seigha, G.J. and Chukwudi, I.M., Culture, Tourism and Economic Development in Nigeria: The Role of the Mass Media.
[vi] Constitution of the Federal Republic of Nigeria, 1999.
[vii] Ierkwagh, K. and Hia, C., 2020. Taxation, Good Governance, and Service Delivery in Nigeria: A Legal Perspective. JL Pol’y & Globalization, 99, p.92.
[viii] Section 9 Companies Income Tax Act 2007
[ix] Dugeri, M., 2021. ENTERTAINMENT LAW IN NIGERIA: A Foundational Analysis of the Emerging Trends, Sources, Practice, and Precedents. Sources, Practice, and Precedents (July 1, 2021).
[x] EHIGIATOR, E. and UCHEAGWU-OKOYE, O.N.Y.I.N.Y.E., 2021. A CRITICAL APPRAISAL OF THE LEGAL FRAMEWORK OF VALUE ADDED TAX (VAT) IN THE NIGERIAN ECONOMY. Madonna University, Nigeria Faculty OF Law Law Journal, 6(1).
[xi] Macedo, A., Rocha, M., Alcoforado, A., Braun, M., McNaughton, C., Scheller, P., McNaughton, C.P., Mendes, R.V., de Paiva Gomes, D., Nunes, R. and de Paiva Gomes, E., 2024, January. Chapter V: Taxation of the Digital Economy. In Comparison of Brazilian and German Tax Systems (pp. 217-268). Nomos Verlagsgesellschaft mbH & Co. KG.
[xii] Nzuza, K., 2021. Image rights payment: The taxation of resident sportspersons.
Written by Grace Eniyandunmo for The Trusted Advisors
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