Summary

President Muhammadu Buhari recently transmitted the Finance Bill, 2021 ("the Bill") to the National Assembly for passage into law.  The Finance Bill, 2021, which is intended to support the implementation of the 2022 Federal Government Budget, seeks to introduce significant changes to a number of tax and regulatory laws in Nigeria in response to the continuing negative impact of the COVID-19 pandemic on the economy and the current recession.

Details

The request by the President seeking the passage of the Bill into law was contained in a letter titled "Transmission of the Finance Bill 2021 to the National Assembly for Consideration and Passage into Law in Support of the 2022 Budget" sent and addressed separately to the Senate and the House of Representatives.

The Bill seeks to amend some key provisions of certain laws such as: the Capital Gains Tax Act, Companies Income Tax Act, Federal Inland Revenue Service (Establishment) Act, Personal Income Tax Act, Stamp Duties Act, Tertiary Education Trust Fund (Establishment) Act, Value Added Tax Act, Nigerian Police Trust Fund (Establishment) Act, National Agency for Science and Engineering Infrastructure Act, Finance Control and Management Act, and Fiscal Responsibility Act.

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

  • Introduction of conditions for the exemption of disposal of securities from Capital Gains Tax (CGT).  Based on the Bill, gains from disposal of securities will be exempt from CGT when any of the following conditions are fulfilled:
    • the proceeds are to be reinvested in the acquisition of shares in a Nigerian company within the same year of assessment;
    • the aggregate of the disposal proceeds is less than ?500 million in any 12 months and returns are rendered thereon on annual basis;
    • the transfer of shares is between an approved borrower and lender in a Regulated Securities Lending Transaction;
  • Inclusion of gaming revenue of a lottery and gaming business as taxable under the Companies Income Tax Act (CITA);
  • Foreign companies engaged in provision of digital services in Nigeria (e-commerce, online adverts, payments, applications etc.) may be taxed on a turnover basis;
  • Capital allowances of small and medium companies, other than those enjoying pioneer status incentive, which are brought forward will be deemed to have been enjoyed in each year of assessment;
  • Exclusion of companies with pioneer status incentives or other gas utilization incentives under any law in Nigeria from enjoying the gas utilization incentive under the CITA;
  • Grant of power to the FIRS to deploy proprietary or third party technology in gathering information and making tax assessment;
  • Increase of penalties for a Bank's failure to provide correct information or returns from ?500,000 to ?2,000,000;
  • Exclusion of upstream petroleum operations under the Petroleum Industry Act and Petroleum Profits Tax Act from the ?25,000,000 threshold for remittance of VAT;
  • Adjustment to the rules of debt management. This covers the requirement for government at all tiers to only borrow for capital expenditure, human development and to undertake critical reforms of significant national impact, provided that, such borrowing shall be on concessional terms or at relatively low interest rates and with a reasonably long amortization period subject to approval of the appropriate legislative body where necessary;
  • FIRS is recognized as the primary agency of the Federal Government for the purposes of assessment, accounting for, collection and administration of taxed and levies due to the Federal Government and any of its agencies except as authorized by the Minister Finance by Regulations;
  • Reduced Minimum Tax rate of 0.25% of turnover (less franked investment income) will apply for returns prepared and filed for any two accounting periods between 1st January 2019 and 31st December 2021;
  • Companies are limited to claiming capital allowance on the portion of their assets used to generate taxable income. Where the assets are partially used to generate taxable income, the capital allowance will be pro-rated with the exception of scenarios where the proportion of the non-taxable income does not exceed 20% of the total income of the company;
  • Empowerment of the Minister of Finance to issue Regulations, subject to the approval of the National Assembly, for the imposition and administration of the Electronic Money Transfer (EMT) Levy under the Stamp Duties Act as well as the auditing, accounting, allocation and distribution of arrears of EMT Levy and Stamp Duties collected between 2015 and 2019;
  • Tertiary Education Tax to be paid 30 days from the service of assessment as opposed to the currently applicable 60 days;
  • Deletion of the 0.25% annual levy on turnover of companies under the National Agency for Science and Engineering Infrastructure Act.

Implication

In line with the practice since 2019, we believe that the Bill will receive expedited attention and passed into law by the National Assembly alongside the 2022 Appropriation Bill or soon after the Appropriation Bill is passed into law. Given the proposed amendments in the Bill, individuals and corporate entities should begin to analyse the provisions of the Bill and its possible impact on their businesses, incomes and tax obligations going forward.

It is important to note that, like every new law, the Finance Bill, 2021 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 Bill will impact their business operations going forward and any new compliance obligations to be discharged or benefits to be enjoyed. Andersen is at the front of the discourse regarding the Finance Bill and we will provide a more detailed analysis of the Bill and implications prior to and after its passage into law.

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.