On December 31, 2021, the Nigerian President officially signed the 2021 Finance Bill into law, which becomes operative on January 1, 2022. The modifications are as follows:
The proposed modifications, according to the Finance Act, reflect on different taxes and agency acts, particularly
- Capital Gain Tax Act.
- Company Income Tax Act.
- Custom, Excise Tariffs Act
- Federal Income Revenue Service (FIRS) Act.
- Personal Income Act.
- Stamp Duties Act.
- Tertiary Education Trust Fund Act.
- Value Added Tax Act.
- Nigeria Police Trust Fund Act.
- National agency for science and engineering infrastructure Act.
Capital Gain Tax Act.
According to Section 30 of the capital gains tax, a 10% rate will now be applied to all proceeds from the sale of Nigerian government securities, stocks, and shares if the proceeds are reinvested in the same year of assessment in the acquisition of shares. Furthermore, the total disposal revenues in any 12 consecutive months are less than #100 million.
In light of the following requirement on proceeds from the sale of securities, it is envisaged that tax will be incurred proportionately on the proceeds that are not reinvested, and persons disposing of securities should file appropriate returns with the relevant tax authorities on an annual basis.
Section 30(b) contains long-term securities issued by the Nigerian government, as well as other securities previously specified in the Act.
Companies Income Tax Act:
- Profit from Nigerian Companies: Section 13(2)(c) The profits of a Foreign digital company that has significant economic presence in Nigeria , shall be deemed to be derived from or taxable in Nigeria where it transmits, emits or receives signals , sounds , messages , images or data of any kind by any form of transmission apparatus to Nigeria in respect of any activity including electronic commerce, application store , electronic data storage , participative network platform , online payment etc.
- Profit from Nigerian Companies: Section 13(2)(e) The profits of a trade or business that carries out technical, management, consultancy, or professional services outside of Nigeria to a resident in Nigeria shall be only charged withholding tax on the non-resident income.
- Insurance Companies: Section 16
- Profit Exempted from tax Section 23 (c): Educational activities are no longer exempted from company income tax regardless of whether such activities are of a public character.
- Profit Exempted from tax Section 23 (q): do not exempt profit of companies engaged in upstream, midstream, and downstream petroleum operations in respect of goods exported from Nigeria.
- Section 30
- Section 31(1): Allowable Deduction shall be the amount relating to the Qualifying capital expenditure in relation to an asset that is only partially utilized in generating the taxable income such QCE shall be prorated only the portion relating to the taxable income shall be allowable as a deduction: provided that the provisions of this subsection shall apply only where the proportion of non-taxable income constitutes greater than 20% of the total income of the company.
- Payment of Minimum Tax: Section 33(2) Minimum tax is reduced to 0.25% from a 0.5% available for only two accounting period between 1 January 2019 – 31stDecember 2021.
- Gas Utilization (downstream operations) : A revised section 39(1)(a)(i-iii) declares an initial tax-free period of 3 years extended to an additional two years if the service is impressed with the performance of a downstream business as long as this incentive is claimable only once by the same company and this would not apply to any company formed from reorganisation, restructuring, buy back or other similar schemes out of a company which has already enjoyed this incentive or any company that has claimed an incentive for trade or business of gas utilization under any law in Nigeria, including the Petroleum Profits Tax Act or the incentives under the Industrial Development (Income Tax Relief) Act.”
- Returns and provisional accounts: Section55(7) states that any company that claims the minimum tax relief in Section 33(2) but do not comply with the timing of filing returns would be liable to pay penalty that is equal to the reduction claimed.
- Time within which tax (including provisional tax) is to be paid Section 77
- Section 78
- Deduction of Tax at source: Section 81(1-9) this section shall not apply to compensation payment made under a registered securities lending transaction.
Customs, Excise Tariffs (Consolidation Act):
- Section 21(3) An excise duty of #10 per litre is charged on non- alcoholic, carbonated, and sweetened beverages.
Federal Inland Revenue Service (Establishment Act):
- Section 25 (4) FIRS is empowered to make use of special technology for the automation and administration in order to access the taxpayer information provided a 30 days’ notice has been given prior to the assessment period. Taxpayers who do not grant access to the service or have not written in a good cause for an extension shall be liable to a liability of #25,000 for each day it fails to grant access.
- Section 28 (3-4): introduces a penalty charge to N1,000,000 on banks for each of the quarterly returns or information not provided or incorrect returns or information provided.
- Section 68 of this act empowers the FIRS to be the primary agency of the Federal Government responsible for the administration, assessment, collection, accounting, and enforcement of taxes and levies due to the Federation, the Federal Government and any of its agencies except otherwise authorized by the finance minister.
- Personal Relief and Relief for Children, dependents: Section 33 adopts a new subsection (3) states that deductible life assurance premium for personal income tax purposes is to exclude a contract for deferred annuity. (This payment is allowed for deductions are at arm’s length).
- Section 94(1) declares the penalty of #20,000 and a charge of #2,000 for everyday in which the failure continues where the taxpayer refused to provide returns, information or records required by the service.
- Section 89A (3): Finance minister has given the service the power administration, collection, accounting, auditing 2015-2018 ,electronic levy .
Tertiary Education Trust Fund
- Section 1(2) of the Tertiary Education Trust Fund Act was amended to increase the tax rate to 2.5% of assessable profits of companies registered in Nigeria other than small companies.
Value Added Tax Act
- Section 10 of the Value Added Tax Act was amended to make provision and give more clarity to the need for non-resident persons or companies who make taxable supply to Nigeria to register with the FIRS and obtain Tax Identification Number.
- Ssection 14(3) of the Act was amended to empower the FIRS to appoint any person to withhold or collect taxes on behalf of the Service and remit same in the currency of the transactions.
Nigerian Police Trust Fund Act
- Section 4 of the Nigerian Police Trust fund act was amended to empower the FIRS to assess, collect, account and enforce the payment of the levy imposed by subsection 1b of the Act
National Agency for Science and Engineering Infrastructure Act (NASENI)
- Section 20 of the Act was amended so that the agency can get funded from the following sources:
- 1% from the federation account
- Levy of 0.25% on net profit of companies with annual turnover of N100,000,000 and above covering the banking, telecommunication, ICT, aviation, maritime and Oil & gas sector.
- This levy is to be collected by the FIRS and remitted to the agency’s account as stipulated by the ACT.