Olukolade Ehinmosan1, Oluwafunbi Ajayi2


Consistent with a pattern of enacting an annual Finance Act, President Muhammadu Buhari on 31st December 2021 signed the Finance Act 2021 ("FA21") which took effect from 1st January 2022.

The FA21 typically amended various existing tax laws and regulatory legislations in Nigeria, such as the Capital Gains Tax Act, the Companies Income Tax Act, the Value added Tax Act, the Customs and Excise Tariff (Consolidation) Act, the Tertiary Education Trust Fund Act, the Federal Inland Revenue Service (Establishment) Act, the Nigerian Police Trust Fund Act, the National Agency for Science and Engineering Infrastructure Act, the Finance (Control and Management) Act, the Fiscal Responsibility Act amongst others.


Capital Gains Tax (CGT)

Previously, capital gains accruing to a person from the disposal of shares and stocks were not chargeable under the Capital Gains Tax Act.3 However, the FA21 imposes CGT on gains from disposal of shares subject to a specified threshold and other conditions for roll over relief.

Precisely, section 30(2) of the amended CGTA provides thus:

"Without prejudice to any other applicable law, the gains accruing to a person on disposal of its shares in any Nigerian company registered under the Companies and Allied Matters Act shall be chargeable gains under this Act except where —

(a) the proceeds from such disposal are reinvested within the same year of assessment in the acquisition of shares in the same or other Nigerian companies:

Provided that tax shall accrue proportionately on the portion of the proceeds which are not reinvested in the manner stipulated in this subsection;

(b) the disposal proceeds, in aggregate, is less than N100,000,000 in any 12 consecutive months, provided that the person making the disposals shall render appropriate returns to the Service on an annual basis; or

(c) the shares are transferred between an approved Borrower and Lender in a regulated Securities Lending Transaction as defined by the Companies Income Tax Act."

The CGTA taxes proceeds from disposal of shares generally at 5 percent.4 Meanwhile, by the above provision, every investor looking to sell shares pays a 5% tax on the capital gains made from selling shares in a company if such proceeds are not reinvested proceeds into shares. The tax also extends to anyone selling shares of any company in Nigeria even if the shares are not listed on the stock exchange which includes the sale of shares by private equity firms, startups, venture capitalists, or any shareholder looking to sell shares in Nigeria.5

Tertiary Education Tax (TET)

The FA21 has increased the rate of TET payable by Nigerian companies from 2% to 2.5% of assessable profits.6 The Act has also amended the timeline for payment of TET from 60 days7 to 30 days8 after assessment from the Federal Inland FIRS.

Companies Income Tax (CIT)

Prior to the FA21, companies engaged in educational activities were exempted from paying tax.9 Now, such companies are subject to CIT. This is regardless of whether such educational activities are of a public character.10 The applicable tax rate is determined by whether the company is classified as a medium or large company. CIT payable for a medium company (i.e., having more than N100 million Naira turnover) is 20% while 30% would apply to a large company (having more than N100 Million Naira turnover). Small companies (having less than N25 Million turnover) are exempted from CIT in line with the FA21.11

National Agency for Science and engineering InfrastructureAct

Section 20 of the National Agency for Science and Engineering Infrastructure Act (NASENI Act) was also amended by the FA21. The FIRS may now receive a levy rated at 0.25% from commercial companies and firms engaged in banking, mobile telecommunication, ICT, aviation, maritime, and oil & gas with a turnover of at least N100 million.12 Consequently, companies with annual turnover below N100 million are not liable.

Nigerian Police Trust Fund Levy

The FA21 empowers the FIRS to assess, collect, and enforce the payment of Nigerian Police Trust Fund levy.13

Excise Duty on Non-alcoholic Beverages

The FA21 imposes excise duties of N10 per litre on non-alcoholic, carbonated, and sweetened beverages.14

Minimum Tax Rate

The FA21 has reduced the minimum tax rate applicable to companies in respect of tax returns due and filed between 1st January 2019 and 31st December 2021 from 0.5% to 0.25% of gross turnover less franked investment income (FII).15

The minimum tax rate reduction will now apply for three tax reporting periods, from 1st January 2019 to 31st December 2021. However, the taxpayer will only be allowed to apply such reduced rate for two out of the three reporting periods available.16

Companies that claim the minimum tax rate incentive but fail to file CIT returns by the statutory due date will be liable to penalties equal to any amount of relief sought. 17

Federal Inland Revenue Service (FIRS)

  1. Power to deploy third party technology

Section 18 of the FA21 empowers the FIRS to deploy third-party technology to automate the tax administration process, including assessments and information gathering. The FIRS can also give 30 days' notice to taxpayers. The FIRS equally has the right to withdraw or extend the notice if the taxpayer shows "good cause".18 Where a taxpayer fails to grant access to the FIRS after 30 days of receipt of the notice or extension, such taxpayer will be liable to an administrative penalty of N25,000 for every day that the taxpayer fails to grant access to the FIRS.19

  1. Assessment to Tax of Foreign Digital Company

FIRS may assess to tax, the turnover of a foreign digital company involved in transmitting, emitting, or receiving signals, sounds, messages, images, or data of any kind including e-commerce, app stores, and online adverts.20 Companies that fall into any of these categories are mandated to charge, collect, and remit VAT to the FIRS.21

  1. Power to Administer, Assess, Collect and Enforce Federal Government Tax Revenue

The FA21 emphasizes the role of the FIRS as the sole agency responsible for the administration, assessment, collection, accounting, and enforcement of taxes and levies due to the Federal Government.22 The Act further imposes a fine of N10 million or imprisonment for a term not exceeding 5 years upon conviction for any relevant officer(s) who contravenes the above provision.23

Personal Income Tax (PIT)

The Finance Act amended Section 33(3) of the Personal Income Tax (PIT) Act to exclude contracts for deferred life annuity from allowable deductions for PIT computation purposes.24

Stamp Duties

The Finance Act 2021 clearly vests the Minister of Finance with the power to make regulations, subject to the approval of the National Assembly, for imposition, administration, collection, remittance of levies (including auditing, accounting, allocation and distribution of stamp duties and Electronic Money Transfer (EMT) collected between 2015 and 2019 fiscal years within 30days of the date the Act became effective 25 The Act further provides that Electronic Money Transfer (EMT) levies subsequently collected from the commencement of the Act must be distributed within 30days following the month of collection.26

Fiscal Responsibility

The FA21 amended Section 41 of the Fiscal Responsibility Act 2007 (FRA) in respect of debt management framework by the government. Prior to FA21, government could only borrow for "capital expenditure" and "human development" purposes. However, the FA21 expands the borrowing power of the Government, by providing that all government at all tiers can also borrow to embark on "critical reforms of significant national impact" provided that the borrowing must be on concessional terms or at relatively low interest rate and with a reasonably long amortization period.27


We consider the FA21 a positive development in the Nigerian tax landscape especially with amendments geared towards containing the challenges posed by the interplay of digital technologies and commerce. As with any other legislative change, fresh challenges will be experienced by taxpayers. These challenges will be mitigated by consultation with competent tax and legal advisors. It is also expected that relevant revenue authorities would clarify certain tax administrative procedures through the issuance of circulars, public notices, and other subsidiary legislations.


1 Associate, Real Estates & Successions Department, SPA Ajibade & Co, Lagos, Nigeria.

2 Associate, Cross Departmental, SPA Ajibade & Co, Ibadan office, Nigeria.

3 Section 30 of the Capital Gains Tax Act, Cap. C1, Laws of the Federation, 2004.

4 Section 30(3) of the amended Capital Gains Tax Act.

5 https://nairametrics.com/2022/01/07/finance-act-investors-to-pay-10-tax-on-sale-of-shares/ accessed 13th January 2022.

6 Section 28, Finance Act 2021.

7 See, Section 2 of the Tertiary Education Trust Fund (Establishment) Act, 2011.

8 Section 29, Finance Act 2021.

9 See, Section 23 (c) of the Companies Income Tax Act, Cap C21, LFN 2004.

10 Section 7, Finance Act 2021.

11 Section 7(1)(n)- (o), Finance Act 2021.

12 Section 37, Finance Act 2021.

13 Section 36, Finance Act 2021.

14 Section 17, Finance Act 2021.

15 Section 10 (2) (a), Finance Act 2021.

16 Section 10(2) (a), Finance Act 2021.

17 Section 12, Finance Act 2021.

18 Section 18, finance Act 2021.

19 Section 19, Finance Act 2021.

20 Section 8, Finance Act 2021.

21 For further information, see our article on VAT compliance for non-resident suppliers at <<a target="_blank" href="https://www.mondaq.com/nigeria/sales-taxes-vat-gst/1142644/nigeria-tax-issues-highlights-of-the-october-2021-firs-guidelines-on-simplified-vat-compliance-regime-for-non-resident-suppliers"> https://www.mondaq.com/nigeria/sales-taxes-vat-gst/1142644/nigeria-tax-issues-highlights-of-the-october-2021-firs-guidelines-on-simplified-vat-compliance-regime-for-non-resident-suppliers> accessed 16th February 2022 at 12:21 pm.

22 Section 22, Finance Act 2021.

23 Section 22, Finance Act 2021.

24 Section 23, Finance Act 2021.

25 Section 27, Finance Act 2021.

26 Section 27, Finance Act 2021.

27 Section 40, Finance Act 2021.

Originally Published 25 March 2022

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