On July 15, Douglas Kendyson, the founder and chief executive of creator economy startup Selar, accused the Lagos State Internal Revenue Service (LIRS) of “hounding” his company over a backdated 5% royalty fee on all sales processed through the platform.
In an emailed statement to TechCabal, LIRS said its position rests on how those transactions are structured: when someone buys an ebook or a course on Selar, they are paying to access a creator’s copyrighted work.
Payment “may constitute consideration for the use of, or the right to use, the creator’s intellectual property,” the agency said in the statement signed by Monsurat Amasa-Oyelude, its head of corporate communications.
LIRS is testing whether payments for digital content are royalties rather than sales, a distinction that could require creator platforms to withhold 5% before paying creators.
“Where royalty is paid to an individual, resident or non-resident, the applicable withholding tax rate under the WHT Regulations is 5%,” the statement read.
The agency sees the transaction as a licence to use the work, not an outright sale. “The relevant right is the creator’s intellectual property right, which is licenced by the creator to the purchaser, enabling the purchaser to access or use the digital content,” the statement read.
If a withholding obligation exists, someone has to do the withholding. The law places that duty on whoever makes or facilitates the payment. Creator economy startups like Selar, Mainstack, and Nestuge handle the money, so LIRS wants them to deduct the 5% at payout and remit it. The reason is that 400,000 creators are hard to reach, but one platform is not.
On July 17, two days after his viral tweet, Kendyson disclosed that he had met informally with LIRS officials. He said some lines “could’ve gotten crossed,” and a formal meeting has been scheduled where both sides will work through how Nigeria’s new tax laws apply to creators.