Nigeria’s 2020 Fiscal Reforms: 18 Nuggets Every SME Must Know + Do

In October 2019, President Muhammadu Buhari submitted the Finance Bill 2019 to the National Assembly. The bill seeks to implement wide fiscal reforms and transform the government approach to tax administration. While some components introduce increments, several others are aimed at reducing taxes, especially for SMEs, thereby stimulating economic activities. We have itemized 18 Nuggets Every SME Must Know + Do

  1. Small businesses with turnover less than ₦25m will be exempted from CIT,
  2. Lower CIT rate of 20% will apply to medium-sized companies with turnover between ₦25m and N100m.
  3. Companies will only be subject to minimum tax at 0.5% of turnover if turnover exceeds ₦25m
  4. Companies that make CIT payment on or before 90 days from the due date for filing will be entitled to a bonus of 1% (for large companies with turnover greater than N100m) or 2% (for medium-sized companies with turnover between N25m and N100m).
  5. Small businesses may have to prove to their customers that they do not meet the threshold to avoid withholding tax.
  6. Commencement and cessation rules have been modified to eliminate overlaps and gaps to avoid double taxation and complication during commencement.
  7. The restriction of carry forward of tax losses has been amended such that tax losses can be carried forward indefinitely.
  8. Companies must now pay their CIT liability on or before the due date of filing in one lump sum; or in instalments agreed with the FIRS with the last instalment paid on or before the filing due date.
  9. The VAT rate to increase from 5% to 7.5%.
  10. VAT registration threshold of ₦25 million turnover in a calendar year to be introduced.
  11. Penalties for failure to register will increase to ₦25,000 for the first month of default and ₦20,000 for each subsequent month.
  12. The meaning of supply and definition of goods and services has been expanded to cover intangible items other than land, among others.
  13. Remittance of VAT now to be on a cash basis.
  14. A clear definition of basic food item and definition of exported service as “service rendered within or outside Nigeria by a person resident in Nigeria to a person outside Nigeria.
  15. Banks to request for Tax Identification Number (TIN) before opening bank accounts, while existing account holders must provide their TIN to continue operating their accounts.
  16. Stamp duty on bank transfer to apply only on amount from ₦10,000 and above. Transfers between the same owner’s accounts in the same bank also to be exempted.
  17. The scope for goods subject to excise duties based on the Customs Act now expanded to include “goods imported and those manufactured in Nigeria.
  18. Under the proposed amendment, the SDA now defines ‘instrument’ to include “every written document including electronic documents”

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