On Monday, President Muhammadu Buhari signed the 2019 finance bill into law thereby paving way for the proposed increase in the rate of value-added tax from the present 5% to 7.5%.
The bill was submitted to the national assembly alongside the budget last year.
However, the bill was signed into law today in Abuja, some 27 days after the 2020 budget was signed into law on December 17.
“I am pleased to announce that this morning I signed into law the Finance Bill, 2019,” a tweet on the president’s Twitter account read.
“We introduced the bill alongside the 2020 budget, to reform Nigeria’s tax laws to align with global best practices, support MSMEs in line with our Ease of Doing Business Reforms, incentivize investments in infrastructure and capital markets and raise government revenues.”
The law seeks to amend the Petroleum Profit Tax Act, Customs and Excise Tariff Act, Company Income Tax Act, Personal Income Tax Act, Value Added Tax, Stamp Duties Act and the Capital Gains Tax.
The bill also made provisions for companies with an annual turnover of less than N25 million to be exempted from paying company income tax.
The federal government also raised the threshold from which stamp duty will be charged for online transactions from the current N1,000 to N10,000.
Here Are 10 Things To Note About The Bill
1. Banks will request Tax Identification Number (TIN) before individuals are allowed to open bank accounts. Existing account holders must provide their TIN to be able to operate their accounts.
2. Non-residents who provide imported technical and management services in Nigeria will be taxable at a final Witholding Tax rate of 10%.
3. Dividends distributed from petroleum profits will attract 10% withholding tax. This will affect those with investments in oil and gas investments.
4. A minimum tax (mainly applies to those without profit & unable to pay CIT) provisions of 0.5% of turnover will apply to all companies and exemption will only apply to small companies (less than 25m turnover). Non-resident companies will now pay minimum tax.
5. Small businesses with turnover less than N25m to be FULLY exempted from Companies Income Tax (CIT) & entities with less than N25m in turnover are exempted from VAT registration.
6. A CIT rate of 20% applies medium-sized companies with turnover between N25m and N100m. It’s a boost for SMEs.
7. The law will now allow use of EMAILS as a communication medium with tax institutions – FIRS & State Revenue Agencies.
8. Early payment of Company Income Tax is incentivised with deduction of 2% of tax payable (medium-sized companies) and 1% for large companies.
9. The Value Added Tax is proposed to increase from 5% to 7.5%. The 2020 Budget projections are based on this new increase. States & LGAs benefit more from VAT increase.
10. Stamp duty on bank transfers will apply to amounts of N10,000 and above. Transfers between the same owner’s accounts in the same bank will be exempted. Electronic bank transfers included.
Culled From BudgIT Nigeria