The presidency had made
public the breakdown of Finance Bill, 2019, which was submitted to the National
Assembly by President Muhammadu Buhari alongside the 2020 Appropriation Bill,
and signed into law by the president on Jan. 13, 2020.
The breakdown was released by Mr. Laolu
Akande, Senior Special Assistant to the President on Media and Publicity,
Office of the Vice President, on Sunday in Abuja. The Act has the following
objectives. “Promoting fiscal equity by mitigating instances of regressive
taxation. “Reforming domestic tax laws to align with global best practices.
“Introducing tax incentives for investments in infrastructure and capital
markets. “Supporting Micro, Small and Medium-sized businesses in line with the
administration’s Ease of Doing Business Reforms. “Raising Revenues for Federal,
State and Local Governments.” The fact sheet on the new Act indicates that it
was the first legislation created to accompany an Appropriation Act since the
return of democracy in 1999. The new Act raises VAT from five per cent to 7.5
per cent. To allay fears that low-income persons and companies will be
marginalised by the new law, reduce the burden of taxation on vulnerable segments
and promote equitable taxation, the Finance Act 2019 has extended the list of
goods and services exempted from VAT.
The additional exemptions include the following:
“Basic food items – additives (honey), bread, cereals, cooking oils, culinary
herbs, fish, flour and starch, fruits (fresh or dried), live or raw meat and
poultry, milk, nuts, pulses, roots, salt, vegetables, water (natural water and
table water). “Locally manufactured sanitary towels, pads or tampons. “Services
rendered by microfinance banks; tuition relating to nursery, primary, secondary
and tertiary education. “Nigeria’s increased new VAT rate of 7.5 pe rcent is
still the lowest in Africa, and one of the lowest anywhere in the world — South
Africa VAT: 15 per cent; Ghana: 12.5 per cent; Kenya: 16 per cent; Egypt: 14
per cent ; Rwanda: 18 per cent; Senegal: 18 per cent.” Under Nigeria’s revenue
sharing formula, 85 per cent of collected VAT goes to States and Local
Governments. This means that the bulk of additional VAT revenues accruing from
the increase will go towards enabling States and Local Governments meet their
obligations to citizens, including the new minimum wage as already noted by State
Governors. The Buhari administration had firmly resisted previous suggestions
to raise VAT. The new Finance Act exempts Businesses with turnover below 25
million from VAT payments. Companies Income Tax (CIT) — under the new law small
companies – companies with less than N25 million in annual turnover are charged
Zero CIT. “CIT for Companies with revenues between N25 and N100 million
(described in the Act as “medium-sized” companies) has been reduced from 30 per
cent to 20 per cent. “Large companies with annual turnover greater than N100
million will continue to pay the standard 30 per cent CIT. “The new Act
includes a provision that grants to all companies engaged in agricultural
production in Nigeria, an initial tax-free period of five years renewable for an
additional three years. “The new Act also provides incentives to promote tax
compliance through bonus reductions in CIT for early remittance: “Two per cent
bonus for medium-size companies; one per cent bonus for other companies.” On
Personal Income Tax, the new Act now includes electronic mail as an acceptable
form of correspondence for persons disputing assessments by the Tax
Authorities. Contributions to Pension and Retirement Funds, Societies and
Schemes are now unconditionally tax-deductible. Stamp Duty Tax — with the new
Act, the N50 Stamp duty charge is now applicable only to transactions amounting
to N10, 000 and above, a significant increase on the former threshold of N1,
000. The new Act expands the list of items exempted from stamp duty. The new Act
also makes provisions for Customs and Excise Tariff. It stipulates that to
reduce unfair advantages previously conferred on imported goods at the expense
of locally manufactured ones, certain imported goods are now subject to excise
duties similar to locally manufactured goods.
NAN
Source: Vanguard Nigeria News