Pavestones’ Legislative Update: The Finance Bill 2019
On November 21, 2019, the Senate passed the Finance Bill (2019). The bill makes extensive changes to the tax laws in Nigeria with the objective of introducing tax incentives for investments in infrastructure and capital markets; supporting Small and Medium Scale Enterprises (SMSEs); and raising revenue for government, amongst others.
Some Key Changes To Existing Tax Laws
- Companies Income Tax (CIT) Act
The Amendment:
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- introduces a basis for computation of minimum tax for companies and exempts companies with turnovers of less than ₦25,000,000 from paying minimum tax, while companies with turnovers between ₦25,000,000 – ₦100,000,000 will pay a reduced CIT of 20%;
- exempts the dividends and rental income received by real estate companies on behalf of their shareholders from tax provided that a minimum of 75% of such dividends or rental incomes are distributed within 12 months of the end of the financial year in which they were earned; and
- allows insurance companies to carry forward losses indefinitely as opposed to the 4-year restriction previously in place.
2. Personal Income Tax Act
The Amendment:
- removes provisions granting personal income tax reliefs but maintains child benefit deduction set at ₦2500 per child with a maximum of 4 children;
- mandates banks to require Tax Identification Numbers from corporate customers who intend to open or maintain a bank account; and
- introduces forwarding objections against tax assessments to tax authorities via electronic mail and courier services.
3. Value Added Tax (VAT) Act
The Amendment:
- increases the VAT rate to 7.5%;
- exempts companies with annual turnovers of less than ₦25,000,000 from filing VAT returns; and
- no longer requires foreign entities carrying on business in Nigeria to register for VAT in Nigeria and include VAT charges in their invoices.
4. Stamp Duties Act
The Amendment increases the stamp duty on receipts to N50 on every transaction from N10,000 and above; and expands the definition of receipt to cover electronic transactions.
Some of the key reforms introduced in the Finance Bill are a welcome development and have the capacity to stimulate the growth of SMSEs operating in various sectors of the economy due to the tax reliefs available to them whilst increasing government revenue and encouraging foreign direct investment in Nigeria.
