Nigeria: National Tax Policy Implementation Committee Presents Report On Tax Law Reforms

Last Updated: 15 February 2018
Article by Deloitte Nigeria

Most Read Contributor in Nigeria, October 2018

The National Tax Policy Implementation Committee (NTPIC or the Committee), on Friday 2 February 2018, presented its progress report on the review of tax laws and regulations, and proposed tax reforms to the Minister of Finance (MoF), Mrs. Kemi Adeosun.

The Committee was constituted following approval of the revised National Tax Policy (NTP or the Policy) by the Federal Executive Council in February 2017 (see link to our tax alert), to drive implementation of the Policy.

The mandate of the Committee was to carry out reviews of tax laws and regulations in accordance with the recommendations of the NTP, while taking into consideration the Economic Recovery and Growth Plan (ERGP) and the Ease of Doing Business Plan.

Efforts of the Committee were focused on reforms that could be implemented within a short time without unnecessary controversy while other desirable reforms were deferred to the future.

Some of the major recommendations of the Committee are presented below:

1. Companies Income Tax Act (CITA)

  • Deletion of Section 16(7) of CITA which restricts carry forward of losses by insurance companies to 4 years and replacing it with a new subsection that allows indefinite carry forward of losses
  • Amendment of Section 19 of CITA to avoid double taxation of retained earnings on which tax has been paid and exclude exempt profits from excess dividend tax
  • Deletion of commencement rule provisions to reduce the impact of double taxation on new companies
  • Amendment of Section 31(2)(a)(ii) to allow for indefinite carry forward of losses made by companies during their commencement period
  • Deletion of Section 39(1)(e) to remove bureaucracy regarding ministerial approval for loan obtained for gas projects and to improve ease of doing business
  • Deletion of other overlapping and obsolete provisions

2. Value Added Tax Act (VATA)

  • Amendment of Section 2 and 46 of VATA in order to include "intangible property" as a chargeable item and define 'taxable supplies", respectively
  • Inclusion of guidelines on turnover thresholds for VAT registration and giving the MoF power to amend the threshold
  • Inclusion of Section imposing obligation to self-account for VAT on recipients of taxable supplies by non-resident companies (NRCs) regardless of whether the NRC charged VAT on its invoice or not
  • Deletion of other overlapping and obsolete provisions
  • Modification of Part 1 and 2 of the First schedule to VATA, through an Executive Order, to include residential property leases or rentals, shared passenger –transport services, life insurance as VAT exempt goods/services and deletion of obsolete provisions

3. Customs Excise and Tariff Act (CETA)

  • Introduction of a specific rate system in addition to the existing ad valorem rate system for tobacco and alcoholic products
  • Inclusion of eight additional items to the list of goods manufactured in Nigeria that are subject to excise duties in line with ECOWAS directive

4. Personal Income Tax Act (PITA)/ Pension Contribution

  • Modification of Section 58 of PITA on mode of delivery of notice of objection to include delivery in person, by courier or via electronic mail, to accommodate developments in the ICT
  • Modification of Section 87 to make the different names adopted by State Revenue Authorities admissible by the law
  • Deletion of overlapping and obsolete provisions

5. Industrial Development (Income Tax Relief) Act (IDITRA) and Tertiary Education Trust Fund (Establishment, Etc.) Act

  • Extending the tax relief granted under IDITRA to Tertiary Education Tax, National Information Technology Development levy and other taxes imposed on profits of companies
  • Restriction of capital allowance claimable on capital expenditure incurred during the tax relief period of a company to annual allowance upon expiration of the tax holiday

The recommendations of the Committee have been put together in 2 Executive Orders and 5 Amendment Bills as follows:

  • Executive Orders Value Added Tax Act (Modification) Order
  • Review of Goods Liable to Excise Duties and Applicable Rates Order, 2017
  • Amendment Bills Companies Income Tax Act (Amendment) Bill
  • Value Added Tax Act (Amendment Bill)
  • Customs, Excise, Tariff etc. (Consolidation) Act (Amendment) Bill
  • Personal Income Tax Act (Amendment) Bill
  • Industrial Development (Income Tax Relief) Act (Amendment) Bill

It is expected that the draft Executive Orders and Bills will be exposed for engagement of key stakeholders while being considered by the Federal Executive Council and before they are presented to the National assembly.

Therefore, it is imperative for companies and other stakeholders to review the proposed amendments in more details to ensure that all relevant and crucial issues are raised before the Bills and Orders are enacted. Companies are also advised to use the proposed amendments as a guide in planning their business operations and strategies in the near future.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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