The Finance Bill 2021 has been transferred to the National Assembly for consideration. The new bill introduces several amendments to 12 different laws and takes effect in 2022. Below are some of the key proposed changes introduced by the Finance Bill 2021:
Capital Gains Tax
- Disposal of shares of a Nigerian company will be subject to Capital gains tax at the rate of 5% except the proceed are reinvested within the same year of assessment, the disposal proceed is less than N500m in any 12 consecutive months or the transfer of shares is under a regulated Security Lending Transaction.
Company Income Tax
- Where a portion of an asset is used in generating taxable income, the asset shall be pro-rated and only the portion relating to the taxable income shall be allowed for capital allowance. The provision of this section shall apply only where the non-taxable income portion is more than 20% of the total income. This will not apply to a company that enjoys pioneer status.
- Any capital allowance or unabsorbed allowances of a small or medium company shall be treated as having been claimed and consumed by the company in each such year of assessment. This will not apply to a company that enjoys pioneer status.
- Part of the turnover attributable to a foreign digital company involved in transmitting, emitting, or receiving signals, sounds, messages, images, or data of any kind including e-commerce, app stores, online payments, online adverts, etc. to the extent that they have a significant economic presence in Nigeria shall be assessed to tax under CITA.
- The minimum tax is to be levied at 0.5% of gross turnover less franked investment income except for returns filed between January 1, 2020, and December 31, 2021, which is for two accounting periods between 1 Jan 2019 and 31 Dec 2020.
- Lottery and Gaming business shall be taxable under CITA including betting, a game of chance, promotional competition, gambling, wagering, video poker, roulette, craps, bingo, slot or gaming machines, and the likes.
- Where an objection or appeal is yet to be determined, the collection of tax shall be suspended until determination, however the undisputed tax assessment should be paid. Where the objection or appeal has been determined, the tax is to be paid within 30 days after service of the notice of assessment on the company.
- WHT on interest earned from a unit trust shall be the final tax.
- Profit from goods exported from Nigeria by companies engaged in petroleum activities including Midstream and Downstream activities will not be exempted from tax.
- The definition of real estate investment company now includes Real Estate Unit Trust
Federal Inland Revenue Service Establishment Act
- The penalty for contravening Section 28 of the ACT will now be N2,000,000 for each return not filed or incorrect returns or information not provided and the penalty shall be payable for each quarter of default
- FIRS shall make use of third-party technology to automate tax administration including assessment and information gathering. A penalty of N50,000 is to be applicable where a company fails after the 30 days, to provide additional information requested by FIRS when demand is issued. In addition, a N25,000 penalty would accrue for each day the failure continues.
Nigeria Police Trust Fund (Establishment) Act
- FIRS ACT shall apply to the administration, assessment, collection, accounting, returns, and enforcement of the payment of the NPTF levy of 0.05% of profit after tax.
Personal Income Tax Act
- A contract for deferred annuity has been removed as a personal relief for PIT purposes.
- The penalty for banks that contravene sections 47 and 49 of PITA shall be N2,000,000.00 for each of the returns not filed or incorrectly filed.
- Persons who contravene the provisions of PITA and where no penalty is provided shall be liable to a Penalty of N20,000.00 and N2,000.00 for every day the failure continues.
Tertiary Education Trust Fund Act
- Tertiary Education Tax is now to be payable within 30 days of service of assessment (a change from the 60 days currently being practiced).
Stamp Duties Act
- The Minister of Finance, subject to the approval of the National Assembly, shall make regulations for the imposition, administration, collection, remittance, including distribution of arrears of stamp duty and Electronic Money Transfer levies collected between 2015 and 2019 fiscal years.
Value Added Tax Act
- Non-residents that make taxable supplies to persons in Nigeria shall register for tax, charge, collect, and remit VAT to FIRS. The VAT will only be withheld when the non-resident or its appointed agent fails to collect the VAT.
- The exemption from VAT registration and compliance obligation applicable to small companies with annual turnover less than N25m should now exclude companies engaged in upstream petroleum operations irrespective of turnover.