Provisions of the new Finance Bill in Nigeria
So many persons see the Finance Bill as a welcome change in Nigeria Tax regime because of some of the favourable additions to the bill. Although there is a debate that the Increase in Value Added Tax from 5% to 7.5% is inconvenient to the ordinary Nigerian.
The Finance bill having been signed into Law on the 13thof January, 2019 is now being referred to as the Finance Act, 2019.
Listed below is a summary of the provisions of the new law;
- Value Added Tax: The Value added Tax rate was increased from 5% to &7.5%. This means a 2.5% additional payment will be made on all transactions where VAT is charged. Basic commodities, education items and pharmaceutical items are exempted from VAT, while companies with a turnover of N25, 000, 000 (Twenty Five Million Naira) or below are exempted from filing VAT returns.
- Capital Gain Tax: Companies are exempted from Tax during re-organisation. Also compensation received from loss of employment which is up to N10, 000, 000 (Ten Million Naira) would be exempted from paying Captain Gains Tax.
- Personal Income Tax (PIT): Every existing bank account holder and new account holders must have a Tax Identification Number (TIN) to operate their accounts.
- Petroleum Profit Tax:The bill exempts payment of Withholding Tax (WHT) from dividends paid out of profits form petroleum operations.
- Company Income Tax (CIT):
i. The Law introduces the taxation of Non- residential companies (NRC) making money from the Nigerian economy.
ii. Small scale business that make less that generate less than N25, 000, 000 (Twenty Five Million Naira) in Annual turnover would be exempted from paying Company Income Tax.
iii. Medium scale Business that generate more than N25, 000, 000 (Twenty Five Million Naira) turnover annually but less than N100, 000, 000 (One Hundred Million Naira) in turnover annually will be required to pay 20% CIT as opposed to the initial 30%.
iv. Large companies with annual turnover of a N100, 000, 000 (One Hundred Million Naira) and above will be required to pay 30% of their profit as CIT.
- Custom and Excise Tariff: Taxes are also to be paid on imported goods.
- Stamp Duties. Electronic Stamping is now recognised as a form of stamping. There is now a compulsory payment of stamp duty of N50 on every transaction above N10, 000.
Finally, in order for the tax laws to be effective, the penalty for non-compliance of filing CIT has increased from N25, 000 (Twenty Five Thousand Naira) in the first defaulting month to N50, 000 and penalty for the subsequent months has increased from N5, 000 (Five Thousand Naira) to N25, 000 (Twenty Five Thousand Naira). Also, there are additional incentives for companies that remit their taxes on time.
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