Unraveling the complex tapestry of e-commerce regulations is essential for all professional businesses to flourish digitally in the 21st Century. This particularly is not just an issue of a sole geographical area at a point in time but global, especially for those of us who are already in the business of internet marketing or locally put ' internet side hustles.'
Realistically, the internet now presents us with opportunities to own shops online on different social media platforms such Facebook, Whatsapp, Instagram and many others. While many of these said online businesses might not be registered under the regulatory authority of the NCC , there are still legal frameworks and compliance requirements governing the activities of e-commerce businesses in Nigeria as it is for all other physical business transactions.
As small business owners, online shoppers, or stakeholders in big brands, a deep understanding of these regulatory nuances would go a long way in providing you with ways you can navigate these terrains successfully and stay while buying or selling on the internet.
More so, it also ensures that our online earning ventures thrive safely without ignorantly falling under the hammers of federal bodies like the National Information Technology Development Agency (NITDA) tasked with the responsibility of regulating and promoting the development of information technology in Nigeria, including e-commerce activities.
So, what are these laws and regulations, and how do they affect or dictate our activities as an online business person, consumer, or organization?
1. The Nigerian Communications Commission Act
The Nigerian Communications Commission (NCC) Act is a legislative framework that governs the telecommunications sector in Nigeria. It established the NCC as the regulatory authority responsible for overseeing and regulating the telecommunications industry in the country. Under this act, all businesses, e-commerce inclusive, are expected to get their business registered and validated by the NCC. Non-compliance will lead to legal consequences, fines, or sanctions.
2. Cybercrime (Prohibition, Prevention, ETC) Act 2015
This addresses various forms of cybercrimes, including online fraud and cyberattacks, which can affect both the consumer and online businesses. It aims to protect the integrity of online transactions. More so, to prevent businesses from fraudulent activities on the internet.
3. Electronic Transactions Act
This act recognizes the legal validity of electronic signatures, contracts, and records, providing a legal framework for all online transactions between businesses and their customers.
A typical example is when a customer purchases a product from an online retailer within the country using their credit card or digital payment method. This transaction is legally recognized and protected by this Act.
4. Consumer Protection Council Act
It establishes the Consumer Protection Council, which is responsible for protecting your consumer's rights and interests, including those in e-commerce transactions. A real-life scenario is when you buy a defective electronic device in Nigeria and file a complaint with the Consumer Protection Council. The Council investigates the issue and ensures your consumer's rights are protected, leading to a resolution or refund.
5. National Information Technology Development Agency (NITDA) Act 2007
NITDA regulates and promotes the development of information technology in Nigeria, which is essential for the growth of e-commerce.
Anyone looking to start an e-commerce business in Nigeria would need to be aware of and comply with NITDA's regulations related to data security and privacy, as well as any initiatives or programs that support the growth of the digital economy. NITDA's guidance and oversight would be very essential to ensure the business operates in accordance with the law and takes advantage of opportunities in the evolving digital landscape.
Some various ways a number of e-commerce businesses flaunt this act could be an individual or business that operates an online marketplace for counterfeit goods, knowingly selling imitation products while infringing on trademarks and copyrights. This behavior not only violates e-commerce regulations but also undermines the intellectual property rights of legitimate businesses.
6. Federal Competition and Consumer Protection Act 2018
This act aims to ensure fair competition and protect consumers by regulating anticompetitive practices and deceptive marketing online.
The act helps make sure that when you shop online, you're getting exactly what you paid for. For example, if an online store allows fake or low-quality products to be sold, the act steps in to stop this and make sure such a marketplace is fair and safe for shoppers. It's like having rules to ensure fair play when you're buying things on the internet
It helps prevent businesses in the e-commerce industry from doing things that harm consumers or give them an unfair advantage.
7. Payment Card Industry Data Security Standard (PCI DSS)
This is a global security standard that all e-commerce businesses in Nigeria must comply with to protect cardholder data and ensure secure online payment processing.
Imagine an e-commerce company based in Nigeria that sells products or offers service online and accepts credit card payments from customers. Let's say like Jumia, Konga, etc. To comply with PCI DSS, they must ensure that the cardholder data (credit card information) collected during transactions is stored and transmitted securely. They use encryption methods to protect this sensitive data and they must have security measures in place to prevent breaches.
You see this most times when you make payment for your Gotv or DStv cable subscriptions for the first time through card transactions (Verve, Mastercard, PayU, Interswitch, Quickteller, etc).
8. Nigeria Data Protection Regulations (NDPR)
This was introduced in 2019 to govern the collection and processing of personal data in e-commerce, ensuring privacy and security for all online consumers and internet users in the country.
Every e-commerce business operating in Nigeria that collects personal information from its customers, such as names, addresses, and payment details must comply with the data protection regulations. It is mandated that your organization in any online transaction obtain clear consent from customers before collecting their data.
Companies in their online business activities like monthly subscriptions, registration for training programmes, membership profile, etc must also implement strong security measures to protect this data from being hacked or misused. Additionally, the company has to provide customers with the option to access, correct, or delete their personal information upon request.
9. The Companies and Allied Matters Act (CAMA)
CAMA is a significant piece of legislation that governs the formation, operation, and regulation of companies in Nigeria. CAMA is the primary legislation that regulates corporate entities and businesses in Nigeria.
It outlines rules for registering various types of businesses, corporate governance, shareholder rights, share capital, insolvency, and restructuring. CAMA established the Corporate Affairs Commission (CAC) as the regulatory authority, and it has undergone amendments to align with modern business practices, online or offline, making it crucial for businesses to comply with its provisions.
10. Customs and Excise Management Act:
Finally, E-commerce businesses may also be subject to customs and excise duties on imported or exported goods, depending on the nature of your operations. This will take us to our next discussion below.
Understanding Taxation for Ecommerce in Nigeria: VAT, Income Tax, and Other Considerations
VAT (Value Added Tax)
VAT, or Value Added Tax, is a type of consumption tax that is imposed on the value added to a product or service at each stage of its production or distribution.
Imagine you're running a business that makes and sells shoes. When you buy materials like leather and rubber to make the shoes, you pay VAT on those purchases. This is called input VAT.
Then, when you sell your shoes to customers, you charge them VAT on the selling price. This is called output VAT. The difference between the VAT you collect from customers and the VAT you paid on your materials is what you owe to the government.
So, as a business owner, you're essentially collecting tax from your customers and passing it on to the government. Note, it's important to keep accurate records of these transactions and file your returns on time to avoid penalties.
This is a significant consideration for all e-commerce businesses in Nigeria. Every E-commerce transaction is subjected to this, and compliance with VAT regulations is essential. These are some of the grounds you must cover when considering setting up your e-commerce business. You have to register your business for VAT with the Federal Inland Revenue Service (FIRS) and collect VAT from customers on all taxable transactions. The current rate is set at 7.5% on all value added services and products in the country.
Income Taxes
Income taxes in Nigeria are like a share of your profits that you pay to the government.
Let's make a breakdown starting with your taxable income. Your taxable income is the money your business makes after deducting all the legitimate expenses like website costs, shipping, and marketing.
Nigeria specifically as many other African countries has a tax rate for all businesses. For small businesses, it's generally a flat rate of 20% of your taxable income. But this can vary, so it's important to always check with the tax authorities.
Off or online, it is important to keep good records of your income and expenses. At the end of the financial year, all businesses in Nigeria are expected to file their taxes with the Federal Inland Revenue Service (FIRS), making sure also to meet deadlines.
You can as well take advantage of deductions and exemptions allowed for e-commerce businesses here in the country. For instance, you can deduct expenses related to your business operations.
To be on the safer side as Taxes sometimes can be complex, it is wise to consult or register with a Tax professional or a firm here in Nigeria so they can help you navigate the Nigerian tax system successfully and ensure you and your organization are compliant.
Other Tax Considerations
Aside from VAT and income taxes, other tax obligations you must be aware of as an entrepreneur in Nigria include taxes such as withholding tax on all payments made to suppliers, import duties, and more. Staying informed about these tax considerations is absolutely essential for maintaining compliance.