On 31st December, 2020, President Muhammadu Buhari signed the Finance Bill, 2020 (now Finance Act) into law. The Finance Act, 2020 (the Act), which has a commencement date of 1st January 2021, was signed into law alongside the 2021 Appropriation Bill (now Appropriation Act). The Act introduces significant changes to a number of tax and regulatory laws in Nigeria including the introduction of COVID-19 incentives alongside other changes.


In December 2020, President Muhammadu Buhari transmitted the Finance Bill, 2020 to the National Assembly for consideration and passage into law in support of the 2021 Appropriation Bill. Subsequently, the National Assembly passed the Finance Bill and transmitted same to the President for his assent, in line with the provisions of Section 58 of the Constitution of the Federal Republic of Nigeria, 1999 (as amended). The President thereafter assented to the Finance Bill and the 2021 Appropriation Bill on 31st December, 2020.

The Finance Act, 2020 amends some key provisions of the Capital Gains Tax Act, Companies Income Tax Act, Industrial Development (Income Tax Relief) Act, Personal Income Tax Act, Tertiary Education Trust Fund Act, Customs & Excise Tariff (Consolidation) Act, Value Added Tax Act, Federal Inland Revenue Service (Establishment) Act, Fiscal Responsibility Act, Public Procurement Act, Companies and Allied Matters Act, Nigerian Export Processing Zone Act and Oil and Gas Export Processing Free Zone Act.

Some of the key amendments introduced by the Act include the following:

  • Introduction of the concept of Significant Economic Presence (SEP) to Personal Income Tax;
  • Exemption of small companies with less than ?25million turnover from payment of Tertiary Education Tax;
  • The introduction of a one-off levy of N50 known as the Electronic Money Transfer Levy on electronic transfers and deposits of money in the sum of N10,000 or more to replace the imposition of Stamp Duties on such transfers. This levy is to be accounted for by the person to whom the transfer or deposit is made and will be distributed between the Federal and State Government on a derivation basis of 15% and 85% respectively;
  • Reduction of minimum tax payable by companies to 0.25% of gross turnover provided that the tax returns are prepared and filed in respect of an accounting period that ends on any date between January 2020 and 31st December 2021.
  • Requirement for Federal Inland Revenue Service (FIRS) to utilize adhesive stamp produced by the Nigerian Postal Service when denoting documents by adhesive stamp;
  • Deductibility of donations made in cash or in kind to the government in respect of any pandemic or natural disaster;
  • Empowerment of the Tax Appeal Tribunal to conduct hearings remotely via virtual proceedings;
  • Exclusion of land and buildings, money and securities from the definition of goods and services for VAT purposes;
  • Requirement for companies operating in the Free Trade Zones to file returns with the FIRS;
  • Downward review of Excise Duty rates on tractors and motor vehicles for transportation as well as duty-free importation of aircrafts and its parts for commercial airlines in Nigeria;
  • Introduction of Excise Duty on telecommunication charges at a rate to be prescribed by the President.


With the presidential assent, the Finance Act, 2020 now has the force of law. Thus, companies can begin to analyse the provisions of the Act and its possible impact on their business and tax obligations going forward. Companies may also want to identify the relevant incentives introduced in the Act and how they can take advantage of such incentives and reliefs such as the exemption from Tertiary Education Tax, minimum tax reductions, deductibility of COVID-19 donations amongst others. Non-resident companies and individuals doing business in Nigeria may also want to get advice on how provisions such as the expansion of the concept of SEP to cover Personal Income Tax as well as the requirement for non-resident companies to file audited accounts with their tax returns and those requiring companies operating in the Free Trade Zone to file tax returns with the FIRS, amongst other provisions will impact them.

It should be noted that like every new law, the Finance Act, 2020 is likely to come with its challenges and opportunities for businesses and individuals. Therefore taxpayers are advised to seek professional guidance in order to understand how the Finance Act will impact their business operations going forward and any new compliance obligations to be discharged or benefits to be enjoyed.

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.