Selar Tax Dispute Puts Lagos Creator Royalties in Focus

In Short

• Lagos State Internal Revenue Service is assessing whether creator-platform payments should be treated as royalties.
• If classified as royalties, platforms may need to withhold 5% tax before paying creators.
• The issue is still unresolved, and creator platforms are watching closely.

What Happened

A public dispute involving Selar is drawing attention to how Lagos State plans to tax Nigeria’s creator economy.

On July 15, Selar founder Douglas Kendyson said the Lagos State Internal Revenue Service, also known as LIRS, was pressuring the company over a backdated 5% royalty-related charge on sales processed through the platform.

LIRS responded that its view depends on how the transactions work. When a customer buys an ebook or an online course, LIRS says the payment could be “consideration” for using copyrighted work. In plain terms, LIRS may see it as paying for a licence to access content, not paying to own a product.

That distinction matters because royalties can trigger withholding tax. Withholding tax is money deducted at the point of payment and sent to the government, like a built-in tax deduction. LIRS said the applicable withholding tax rate for royalties paid to individuals, whether resident or non-resident, is 5%.

If that rule applies, the tax authority wants the platforms that process payouts to do the deduction and remittance. The logic is scale. It is easier to enforce compliance through a few platforms than to chase hundreds of thousands of individual creators.

The TechCabal report also mentions other creator platforms, including Nestuge and Mainstack, as part of the wider conversation.

Why It Matters

A 5% withholding requirement could change creator earnings, pricing, and cash flow. It also adds compliance work for creator economy platforms, including tax classification, reporting, and payout processes.

More broadly, this is an early signal of how Nigerian tax authorities may treat digital content and intellectual property income. For founders building creator tools, payment products, or marketplaces, the outcome could shape platform design, terms of sale, and how “digital goods” are defined for tax going forward.