On 13 January 2019, President Muhammadu Buhari signed the Finance Bill, 2019 (now Finance Act) into law. This development was made public by the President via his official twitter handle where he stated that the Finance Act ("The Act") was specially designed to support the implementation of the 2020 National Budget and to create an enabling environment for businesses. The passage of the Finance Act into law, introduces one of the most significant changes in Nigerian tax law over the last two decades, which is the increase in the value added tax rate (VAT) from 5% to 7.5%, in addition to other changes which the Act introduces to other tax laws.


In October 2019, President Muhammadu Buhari presented the Finance Bill alongside the 2020 Appropriation Bill to the National Assembly for consideration and passage into law. The National Assembly subsequently 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 subsequently assented to the Finance Bill, weeks after he had signed the Appropriation Bill in December 2019.

The Finance Act amends some key provisions of the Companies Income Tax Act (CITA), Value Added Tax Act (VATA), Personal Income Tax Act (PITA), Petroleum Profit Tax Act (PPT), Stamp Duties Act and the Customs, Excise Tariff Etc (Consolidation) Act. Some of the prominent amendments effected by the Act include:

  • the increase of the VAT rate from 5% to 7.5%;
  • the introduction of a N25 million VAT compliance threshold;
  • the exemption of companies with less than N25 million annual turnover from payment of CIT;
  • expansion of the scope of companies taxable in Nigeria to include companies that operate within the Nigeria digital space, among others;
  • requirement of a tax identification number for opening of bank accounts or continue operation of existing bank account;
  • provision of exceptions for the application of excess dividend tax under Section 19 of the CIT Act; and
  • imposition of excise on certain imported products.

The Act sets five strategic objectives, which include: raising government revenue through various fiscal measures, reforming domestic tax laws to align with global best practice, promoting fiscal equity by mitigating instances of regressive taxation, supporting small business entities in line with Ease of Business Reforms and introducing tax incentives for investments in infrastructure and capital market.


With the presidential assent, the Finance Act now has the force of law. Given that the Federal Government's Budget for 2020 relies on the Finance Act for its implementation, it should enable the Government increase tax revenue from VAT, stamp duties and the expanded scope of excise tax amongst other sources. But it is not strictly a revenue focused law, as it provides a number of incentives for small businesses in Nigeria and also addresses some lingering concerns such as the issue of excess dividends tax, removal of commencement and cessation rules for companies commencing or exiting business operations in Nigeria, removal of the four year restriction on losses carried forward, exemption of capital gains from tax when assets are transferred between related parties during business reorganization and the expansion of the VAT exempt list amongst others.

At this time a detailed discussion of the Act and its implications may be premature as the official copy is yet to be issued. Once this is done, companies can expect to get a more detailed analysis of all the amendments and changes introduced by the law. It is however clear, that the amendments which the Act makes to existing tax laws, will have significant impact on businesses in Nigeria going forward. In this regard, one issue of concern that is already being discussed relates to the commencement date of the Act (it was initially expected to take effect from 1st January, 2020 along with the Appropriation Act, 2020) and how that will affect suppliers of goods and services who will be required to charge VAT at the new rate of 7.5%. If the commencement date is back-dated, this will create an issue for collection and remittance of VAT at the new rate, for transactions that have already occurred prior to its signing.

Every new law comes with its challenges and opportunities, therefore existing businesses and prospective investors should seek professional guidance to enable them understand how the Finance Act will impact their business operations going forward and any new compliance requirements to be fulfilled or benefits to be enjoyed regarding their tax obligations in Nigeria. Andersen Tax will stay at the front of the discourse regarding the Finance Act and we will provide additional details on the implications of the various provisions of the Act in our subsequent publications.

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.