President Muhammadu Buhari has signed the finance bill into law. The president disclosed this on his Twitter handle.
The law seeks to market financial equity, align domestic laws with international best practices and support small and medium-sized businesses. It was presented with the 2020 appropriation bill. The law was signed weeks after the Budget was approved.
In seeking to expand government revenue, the new law will increase the rate of value added Tax (VAT) from 5 % to 7.5 percent.
The law additionally changes the classification of organizations for the aim of taxation. It classified small companies as those with a turnover of up to N25 million and can be exempt in paying tax whereas, medium corporations with turnover higher than 100million pays 20% of their profits as tax whereas giant corporations with turnover of over 100million pays 30% tax.
Analysts have tagged the law an, omnibus and palliative draft legislation, for the deficiencies of major primary tax legislation by amending obsolete and contentious provisions. This is often a serious aspect of the initiatives urged by the President Enabling Business Environment Council (PEBEC) and the National Tax Policy Implementation Committee.
A provision which will quickly have obvious and direct impact on people is that the introduction of a demand for banks to get tax identification number (TIN) from company customers as a pre-condition for operating bank accounts. Now, people are compelled to get TIN.
Conversely, the law removes the tax exemption on withdrawals from pension schemes except the prescribed conditions are met; emails are to be accepted by the tax authorities as a proper channel of correspondence with taxpayers and also the conditions attached to tax exemption on gratuities are removed. So, gratuities are categorically tax exempt.
Penalty for failure to deduct tax will apply to agents appointed for tax write-off. This penalty is 100% of the tax not subtracted, and interest at the prevailing financial policy rate of the Central Bank of Nigeria.
The law will increase the assets by as well as non-resident corporations (NRCs). The law introduces provisions that make a taxable presence for NRCs carrying on digital activities, practice, technical, management or skilled services in African country, providing they provide “significant economic presence” (SEP) in African country, and profit are often due to such activity.