Over the past three years, Nigeria has witnessed the enactment of annual Finance Acts, along with the National budget. To date, the Finance Acts (2019, 2020 and 2021) have introduced landmark amendments to the tax laws and have reshaped the tax landscape in Nigeria. Indeed, enactment of the Finance Act has become an eagerly anticipated annual ritual among tax practitioners and taxpayers, as changes introduced by the Finance Acts come with attendant implications and provides an outlook for businesses to re-evaluate their strategies. In line with the recent practice of amending relevant tax provisions through Finance Acts, the National Assembly, on 28 December 2022, passed the annual Finance Bill 2022 (the Bill). The Bill, which is currently awaiting the presidential assent, has a proposed commencement date of 1 January, 2023 and introduces significant changes to a number of tax and regulatory laws in Nigeria. The Bill amongst others, seeks to amend key provisions of the Capital Gains Tax Act, Companies Income Tax Act, Customs, Excise Tariff etc. (Consolidation) Act, Personal Income Tax Act, Petroleum Profits Tax Act, Stamp Duties Act, Value Added Tax Act, Corrupt Practices and other Related Offences Act and the Public Procurement Act.

This article focuses on some of the salient tax provisions in the Bill and the potential implications on businesses for both indigenous and non-resident companies.

  1. Increase in Tertiary Education Tax (TET) Rate

The Bill proposes an amendment to Section 1(2) of the Tertiary Education Tax Trust Fund Act (TETFA), to increase the TET rate from the current 2.5% to 3%. TET is payable on assessable profits by Nigerian companies, other than small companies (companies with less than ?25million turnover). Should the Bill receive Presidential Assent, Nigerian companies with tax returns due effective from the proposed commencement date of the Bill (i.e., 1 January 2023) will be required to compute and remit TET at 3% of assessable profits.

It should be recalled that only a year ago, Finance Act 2021 amended the provisions of the same section 1(2) of TETFA and increased TET rate from 2% to 2.5%. While the increase in TET rate is perceived by the Government as an avenue to increase tax revenue, an important question to ask is whether or not the Federal Government, or indeed the tertiary institutions have been accountable with respect to funds received in the past.

In addition to the above, the increase in the TET rate is not in consonance with one of the implementation strategies of the National Tax Policy, 2012 (NTP) to reduce income tax rates and shift towards indirect taxes, in order to minimize tax evasion, ease tax administration and ultimately encourage increased investment and job creation. It remains to be seen, if this proposed increase in TET rate will be retained when the Bill is signed by the President.

  1. Inclusion of "Digital Assets" as Chargeable Assets for CGT Purpose

Section 3(a) of the Capital Gains Tax (CGT) Act has been amended by the Bill, to include digital assets as chargeable assets. Chargeable assets are assets that are subject to CGT, where a capital gain is made upon disposal of such assets.

Currently, the Bill does not include a definition of "digital assets". It is expected, that more guidance will be provided and the term "digital assets" would be given a clear definition, in order to avoid ambiguities and controversies between taxpayers and the tax authorities.

Given the "intangible nature" of most digital assets, an immediate and major concern may be the determination of the historical cost or value ascribed to a digital asset, upon purchase or acquisition. This concern would be heightened where such digital assets are proprietary and internally-developed. Perhaps, it would be ideal to rely on the concept of initial recognition and measurement, in line with relevant accounting principles.

Further, the inclusion of digital assets as chargeable assets may be likened to the inclusion of shares as chargeable assets for CGT, as introduced by Finance Act 2021. Thus, the Government should consider setting a threshold of proceeds, before gains from disposal of such digital assets would be deemed subject to CGT. The Government should also consider including digital assets as assets eligible for rollover relief, where the relevant conditions, such as reinvestment in same class as assets, are fulfilled within the stipulated timeline. This could relieve some cash burden on budding companies and help manage cashflows.

  1. Deduction of Capital Losses for CGT

Prior to the Finance Bill 2022, in computing chargeable gains, capital losses were not deductible against proceeds received from disposal of chargeable assets. The Bill looks to amend Section 5 of the CGT Act, to allow taxpayers deduct losses which accrue on the disposal of any asset, from gains accruing to the person disposing that asset. In addition, where aggregate capital losses incurred by a taxpayer in a tax year exceed the aggregate chargeable gains, such losses may be carried forward to subsequent years, provided that such losses are available to be net-off only against chargeable gains arising from the same asset class.

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