On December 31, 2020, the President of Nigeria signed the Finance Act 2020 (the “Act”) into law. The Act amended fourteen federal tax and finance legislation and came into effect on the January 1, 2021.
The provisions of the Act are in line with the current government’s initiative to improve the ease of doing business in Nigeria and geared towards fostering investment in Nigeria and developing key sectors of the economy.
We have set out below a highlight of the provisions of the Act.
|
Tax involved |
Section of the Act |
Implications |
|
Personal Income Tax |
Section 30 |
Individuals that earn the national minimum wage or lower under any employment are exempted from paying the personal income tax on the wages |
|
Section 25 |
Profits from trades or businesses of non-residents deemed taxable shall be deemed derived from Nigeria subject to the significant economic presence of the non-resident. |
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|
Industrial Development (Income Tax Relief) Act |
Section 23 |
Small or medium-sized companies (annual gross turnover less that 100 million) engaged in primary agricultural production such as raw or semi-processed goods, live animals and their direct produce, all kinds of fish and forestry products |
|
Companies and Allied Matters Act 2020 (CAMA) |
Section 60 |
Dividend unclaimed after 12 years should be shared among the other shareholders. However, dividends from Public limited liability companies quoted on Nigerian Stock Exchange unclaimed after 6 years shall be transferred to the Unclaimed Funds Trust Fund as a debt owed by the federal government and can be claimed by the shareholder any time. |
|
Stamp Duties Act |
Section 48 |
The introduction of the Electronic Money Transfer Levy of fifty naira imposed on money transferred or received (ten thousand naira or above) in any deposit money bank or financial institution. |
|
Tertiary Education Trust Fund Act |
Section 34 |
Small companies (as defined in CAMAi) are exempted from payment of the tertiary education tax. |
|
Value Added Tax Act (VATA) |
Section 43 |
Non-residents individuals are obligated to register under the VATA where they make a taxable supply of goods or service in Nigeria. |
|
Section 44 and 45 |
Commercial aircraft, engines and spare parts, air transportation with registered airlines and lease of agricultural equipment were included in the VAT exemption list. |
|
|
Companies Income Tax Act |
Section 6 |
For agricultural loans to qualify tax exemption, the loan must relate to primary agriculture products with a moratorium less than twelve month and the interest rate does not exceed the base lending rate. |
|
Section 13 |
The minimum tax rate was revised to 0.5% (applicable to companies that make losses or tax payable is less than the minimum tax). However, for tax returns for any year falling due within 2020, the minimum tax shall be assessed at 0.25%. |
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Section 17 |
All companies including companies exempted from incorporation or paying Companies Income Tax shall maintain a record of accounts in the format prescribed by the Federal Inland Revenue Service for six years. |
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Customs and Excise Tariff (Consolidation) Act |
Section 38 |
Import duties for the following goods have been revised as such: Tractors (35% to 5%), cars and motor vehicles for transport of persons (30% to 5%), motor vehicles for transport of above 10 people or goods (35% to 10%), |
Read our article on the Companies and Allied Matter Act where were reviewed the features of a small company under the law.
