On July 15, Douglas Kendyson, founder and CEO 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. The accusation has pulled back the curtain on a broader push by LIRS to apply withholding tax to payments made to digital content creators, with major implications for platforms like Selar, Mainstack, and Nestuge.
In a statement signed by Monsurat Amasa-Oyelude, head of corporate communications at LIRS, the agency said payments to creators “may constitute consideration for the use of, or the right to use, the creator’s intellectual property.” The agency is testing whether payments for digital content should be treated as royalties rather than sales. If so, creator platforms would be required to withhold 5% before paying out 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.
LIRS views 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 said.
If a withholding obligation exists, the law places the 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 5% at payout and remit it. The reason is straightforward: 400,000 creators are hard to reach, but one platform is not.
A meeting of two minds
Two days after his viral tweet, on July 17, 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.
LIRS confirmed the meeting but characterised it differently. The agency said the engagement was part of an ongoing exercise to reconcile outstanding records and clarify the statutory basis of its position, rather than to work through how the law applies to creators.
“The matter remains an open verification and reconciliation exercise,” the agency’s statement read. “Should the exercise ultimately establish a withholding tax liability, LIRS will issue a formal assessment through the statutory process with the attendant rights of objection and appeal before any liability becomes final and enforceable.”
That sequencing raises an obvious question: if a formal assessment comes only after the meetings, why were the platforms not approached before any liability had been established?
LIRS said this order is correct because the duty to withhold is “self-executing and does not depend on a prior notice, reminder, directive, or appointment by LIRS.”
The agency also confirmed that Selar is not alone. It is conducting compliance verifications “across digital economy platforms that process payment distributions to individual content creators,” and it is taking statutory action against Mainstack, another creator economy startup.
“With respect to Mainstack, the Service exercised its statutory powers under Section 67 of the NTAA, 2025, following the company’s failure to respond to official communications,” LIRS’s statement said. “However, upon receipt of Mainstack’s formal objection on Monday, 27 July 2026, the Service will invite the company to a statutory reconciliation meeting per the provisions of the Act.”
Mainstack declined to comment on any part of this article.
What withholding actually means
Withholding tax is not an extra tax but an early instalment of income tax the creator already owes to LIRS, collected by whoever pays it.
“This is a deduction-at-source obligation on the payer, not a charge on Selar’s own income, and not a demand that Selar personally discharge tax liabilities properly belonging to individual creators from its own funds,” LIRS said, citing section 51 of the NTAA and Regulation 4(1)(f) of the Deduction of Tax at Source (Withholding) Regulations 2024.
“The withholding tax is not for the creator economy startups,” said a tax consultant at a Lagos advisory firm, who asked not to be named because he was not authorised to speak to the press. “Under the law, before they pay the creator, they’re supposed to withhold 5%.”
Consider an example: if a platform owes a Lagos based creator ₦1 million ($735) in royalties, it must withhold 5%, which is ₦50,000 ($37). The creator then receives ₦950,000 ($698) in cash and a credit note for the remaining ₦50,000 ($37), which can be set against their own tax bill.
A credit note is the official receipt showing that tax has already been deducted and paid to the state on behalf of the creators. Creators have to present it when filing their return so the amount is deducted from what they owe in taxes.
“They file their taxes. If their rate is 20%, they owe ₦200,000 ($147). They can say to the state, ‘I have a credit note for ₦50,000 ($37), so I only have a balance of ₦150,000 ($110) to pay,'” the consultant said.
“That’s why we don’t usually see withholding tax as a special category of tax itself,” he added. “It’s just an advance of income taxes. The government wants to get their taxes early, because nobody wants to wait until the next year.”
So a creator who files a tax return in Lagos would not lose 5% of her earnings. She would simply pay part of her tax bill earlier than expected, and feel it in her cash flow.
Are creator payouts royalties?
Whether any of this applies depends on one question: is a creator licencing their work to the buyer or selling it? The answer sits in the contract between the platform and the creator. Selar’s terms of service do not settle the question. Lawyers who spoke to TechCabal came away thinking the arrangement looks like a licence.
Creators grant Selar the right to “use, modify, publicly perform, publicly display, reproduce, and distribute” their content on and through the platform, and that permission extends to letting other users of the service “also use your Content,” the platform’s terms and conditions show.
Kelechi Ibe, co-founder of the tax compliance startup Taxstreem, argued that Selar earns its revenue by sub-licencing the creator’s product to customers, who pay Selar for the product, and Selar pays the creators for the licence and keeps a portion of the licence fees.
“The licence and sublicence clauses change my view about the relationship between Selar and the creators,” he said. “I would categorise the payments Selar makes to the creators as royalties, simply because there is no express clause that grants a royalty-free licence.”
Selar also lets creators pass its 4% charge to buyers instead of absorbing it. “If it were a commission, it would always be paid by the principal—in this case, the creators—to the agent,” Ibe said. “By allowing the users to pay the fee, which Selar attempts to classify as a commission, and it not being expressly stated that the users are doing so on behalf of the creator, it is clearly a payment for Selar’s services, which is the use of the licenced content.”
The Nigeria Tax Act 2025 defines a royalty to include “payments of any kind received or receivable, paid or payable as a consideration for the use of, or the right to use or exploit any property.” The list is open ended, and the property does not have to be intellectual.
“It’s not limiting it,” said one tax lawyer who asked not to be named because she was not authorised to speak to the press. “As long as there’s an intellectual property that is being exploited and upon which some consideration of payment is being received, then that has been treated or can be treated as royalties.”
“In most situations, they will be termed royalties, especially for a platform like Selar,” said an intellectual property lawyer who asked not to be named for the same reason. “It’s different if it’s just what Shopify does: come and showcase your goods, and your customers will reach you on here. Those would not be termed as royalties.”
The contract may not be the last word. “When it comes to tax, we look at substance over form,” said the tax consultant at the Lagos advisory firm. “The words of the contract can be a good pointer for the tax authority to understand the nature of the transaction. However, what they will be looking out for is the substance of the transaction.”
Selar disagrees. “The commercial substance of Selar’s arrangement with creators is the provision of software-as-a-service infrastructure (storefronts, payment integration, and delivery tooling) in exchange for a commission on transactions processed through the platform,” Selar said in a statement to TechCabal. “Selar creator payouts are not royalties.”
The Bolt precedent
This is not the first time a platform in Nigeria has wrestled with tax collection obligations. In 2021 and 2022, the Federal Inland Revenue Service (now the National Revenue Service) appointed Bolt, the global ride-hailing platform, as a value-added tax collection agent for the independent drivers and food vendors on its platform. Bolt challenged the decision, making the same argument Selar is making now: that it connects two parties, earns a fee, and is not the supplier.
Bolt lost twice. The Tax Appeal Tribunal dismissed the case in May 2023, and the Federal High Court in Lagos affirmed the dismissal, holding that the tax authority acted within the law when it appointed the platform under section 10(3) of the VAT Act. The court also awarded ₦1 million ($735) in costs against the company.
Bolt filed an appeal at the Court of Appeal in September 2025, arguing that the power to appoint a collection agent is confined to transactions involving non resident suppliers and that its drivers and vendors are Nigerian residents. That matter is yet to be decided.
What it means for creators
For the biggest sellers on these platforms, losing 5% is an inconvenience. They earn enough that the deduction really is an advance on a bill they were always going to pay, and the credit note settles it at year end.
For everyone else, the maths runs the other way. The 5% is deducted from gross sales, but income tax is charged only on what is left after reliefs. Under the Nigeria Tax Act 2025, the first ₦800,000 ($588) of annual income is tax free, with up to ₦500,000 ($368) more deductible for rent.
A creator earning ₦1 million ($735) through a platform in a year would have ₦50,000 ($37) withheld against a tax bill of roughly ₦30,000 ($22), and with the higher reliefs, against no bill at all. She would not be paying early. She would be owed a refund.
Selar paid more than ₦18 billion ($13.2 million) to 400,000 creators last year. Earnings on these platforms concentrate among a small number of large sellers, leaving most creators far below the point where 5% of gross matches what they actually owe.
Getting that money back requires a tax identification number, a filed return, and a credit note that reaches the right person. LIRS did not say whether any threshold exempts small creators or how someone who withheld more than they owe would recover it.
None of this is settled. LIRS said its classification is preliminary and that no assessment currently exists. But its position is also that no warning was ever owed, because the duty to withhold applies on its own.
