Background:
COVID-19 has proven to be more than a disease or global pandemic, it is proving to be the harbinger of an economic crisis of global proportion. Many businesses are being shut or slowed-down and industrial production and retail sales have suffered historical drops. True to its nature, man is fighting back; from controlling the disease, to curing the sick and trying to develop vaccinations against it. In responding to the economic downturns, some countries have designed both fiscal and monetary palliatives in the nature of laws or executive orders. Nigeria is one of such countries; its House of Representatives on Tuesday, March 24, 2020 passed a Bill to cushion the economic effect of the global pandemic. It is styled as “A Bill for an Act to provide for Relief on Corporate Tax Liability, Suspension of Import Duty on Selected Goods and Deferral of Residential Mortgage Obligations to the Federal Mortgage Bank of Nigeria for affixed term to protect jobs and alleviate financial burden on citizens in response to the economic downturn occasioned by the outbreak of COVID-19 disease” (the “Bill”). Our summary of the Bill is set out below.
What does the Bill Say?
The 3 distinct heads of the fiscal intervention provided in the Bill are set out below:
- Job Security to Employees and Relief to Companies: Any corporate employer, that is, an employer that is formed under Parts A or B of the Companies and Allied Matters Act 1990 (as amended), which maintains same employees size, that is, without retrenching or laying off employees between the period 1st March 2020 and 31st December 2020 (the “Period”) will be entitled to set off 50% of the Pay As You Earn Personal Income Tax remittances due or paid on its employees behalf from its income tax liability. Nigeria’s Petroleum Profits Tax is not considered an income tax for the purpose of this stimuli.
An employer will not be regarded as having reduced the number of its employees if the reduction is caused by such factors as the death, voluntary resignation or dismissal (further to the provisions of Nigeria’s Labour Act) of employees. Subject to ratification by the National Assembly, Nigeria’s Executive President can extend the Period. - Moratorium on Mortgage Payments to the Federal Mortgage Bank of Nigeria (FMBN): Repayments on residential mortgages obtained from FMBN have been given a 180 days halt period. The 180 days commences retrospectively from March 1, 2020.Subject to ratification by the National Assembly, Nigeria’s Executive President can also extend the 180 days period.
- Suspension of Import Duty on Medical Supplies: With effect from March 01, 2020 till December 31, 2020, the import duty on all of the following medical goods will be waived: medical equipment, medicines, personal protection equipment, medical necessities for COVID-19 and such other goods as published (gazetted) by the Minister of Health. Nigeria’s Executive President can also extend this period in line with his powers under Nigeria’s Customs and Excise Tariffs etc. (Consolidated) Act.
Our Immediate Thoughts:
While we applaud Nigeria’s House of Representatives’ initiative and speed on the Bill, the current recess of the Nigeria Senate’s sitting poses a bottleneck in the Bill’s legislative process; save and unless the Nigeria Senate’s leadership, advisedly, calls for emergency sessions to debate and pass an improved version of the Bill. We emphasize an improved version of the Bill as the fiscal palliatives it currently provides will prove to be inadequate for persons and businesses in Nigeria. Year 2020 commenced on the note of certain fiscal assumptions, assumptions whose fiscal responses were codified in the Finance Act 2019. A lot of these assumptions have changed between January 13, 2020 when the Finance Act commenced till date. In our view, a sensitive fiscal palliative that the Nigerian Government may give to its citizenry should be to relatively revise the more significant economic impacts of the Finance Act. For example, the new Minimum Tax Rule that now requires all major players in the Nigerian economy to compulsorily pay a minimum 0.5% of their turnover as Companies’ Income Tax should be reviewed, at least for the 2020 ‘pandemic’ year. The Bill needs to be improved and we hope the Nigeria Senate will do so. Trust us to keep you informed as the debate on the Bill continues.
For further information, please contact:
Oluwatimileyin Eniola @ o.eniola@taxaide-intern.com.ng
Abimbola Oyebowale @ a.oyebowale@localhost
Bidemi Olumide @ b.olumide@localhost
Taxaide Professional Services Ltd
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