On Monday, January 13, 2020, President Buhari signed the Finance Bill, 2019 into Law. What exactly does this mean, you may ask? Well firstly, the Finance Bill, 2019 can now be referred to as the Finance Act, 2019. Is that simply all? No, it is not but I will break down all the important things you need to know below. This article will be in two series please look out for the second part of the series.
The aim of the Finance Act, 2019 according to the President is to amongst other things bring about changes to Nigeria’s Tax Laws by making them more responsive to the tax reform policies of the Federal Government, enhance its implementation and effectiveness, improve the Ease of Doing Business Reforms and to support the funding of the 2020 Budget. In simple terms #Tax is the new oil. Since we no longer pluck our money from oil; our new plucking ground is tax.
The Seven (7) Tax Laws which were amended are:
- Capital Gains Tax
- Companies Income Tax Act
- Customs and Excise Tariff
- Personal Income Tax Act
- Petroleum Profit Tax Act
- Stamp Duties Act
- Value Added Tax Act
Important Highlights of the Amendments under the 2019 Finance Bill (Now Act)
- Small Companies; that is companies that earn a gross turnover of N25 million or less are exempted from Company Income Tax (CIT). In case you didn’t see that well, 0% CIT. This must surely bring a lot of relief to business owners in the Micro, Small and Medium Scale Enterprises (MSMEs) and Small and Medium Scale Enterprises (SMEs). The Federal Government is totally on your side.
- Medium-sized Companies; companies that earn a gross turnover greater than N25 million but less than N100 million are required to pay 20% CIT. Another great win for these companies. Another round of applause for the Federal Government. Note that this was previously 30%, hence our excitement.
- To the “big boys” aka Large Companies; companies which are not small or medium-sized; in other words companies with a gross turnover above 100 million, are still required to pay 30% as CIT.
- Increase in Value Added Tax (VAT) rate from 5% to 7.5%. I can hear a few hearts beating now. However, there are some exemptions to VAT. VAT Act already exempts certain items such as pharmaceuticals, educational items, and basic commodities.