- Nigeria's Finance Act enters operations.
- The Act amends the Petroleum Profit Tax Act (PPT), Custom and Excise Tax Act, Company Income Tax Act (CITA), Personal Income Tax Act, Value Added Tax Act, Stamp Duties Tax Act, and Capital Gains Act.
- We look at the good and ugly sides of the new law.
Nigerian President Muhammadu Buhari has signed the country's Finance Bill into law. The newly signed Finance Bill is a robust re-jigging of Nigeria's tax system and providing clarities to old and vague policies.
It aims to increase government revenue with Value Added Tax (VAT) at 7.5% based on the 2020 budget.
The Act also reformed the country's tax regime by amending the Petroleum Profit Tax Act (PPT), Custom and Excise Tax Act, Company Income Tax Act (CITA), Personal Income Tax Act, Value Added Tax Act, Stamp Duties Tax Act, and Capital Gains Act.
Here's a look at the good and ugly sides of the new law:
The good side
- Exempts SMEs (less than N25 million) in annual turnover from corporate income tax.
- Reduction in tax rate from 30% to 20% for companies making N100 million as revenue large companies tax rate remains at 30%.
- More revenues for the government.
- Exempts all locally-manufactured sanitary towels, pads and tampons from VAT. It also exempt from VAT from “tuition relating to nursery, primary, secondary and tertiary education.”
- Tax bonus of 1% to 2% for early tax payment by medium and large companies.
- Dividend distributed from petroleum profits now to attract 10% withholding tax.
The ugly side
- VAT increase from 5% to 7.5% - expect an increase in the price of goods and services not exempted from VAT.
- Individuals now need to have a Tax Identification Number (TIN) before opening business bank accounts while existing account holders must provide TIN to continue operating their accounts.
- Full implementation is key but Nigerians don't trust their leaders adhering strictly to the letter of the new tax policy.