President Muhammadu Buhari on Monday gave presidential assent to the 2019 Finance Bill, setting the stage for major reforms in the country’s tax and public finance landscape.
Even though analysts believe the bill forces struggling companies to pay more to the government, President Buhari, while signing the document, said it would “create a truly enabling environment for business and investment by the private sector.”
Below are 10 features of the bill captured by BudgIT as at November 2019 when it was passed by the National Assembly:
1. Banks will request Tax Identification Number (TIN) before individuals are allowed to open bank accounts. Existing account holders must provide their TIN to be able to operate their accounts.
2. Non-residents who provide imported technical and management services in Nigeria will be taxable at a final Withholding Tax rate of 10%.
3. Dividends distributed from petroleum profits will attract 10% withholding tax. This will affect those with investments in oil and gas investments.
4. A minimum tax (mainly applies to those without profit & unable to pay CIT) provisions of 0.5% of the turnover will apply to all companies and exemption will only apply to small companies (less than 25m turnover). Non-resident companies will now pay minimum tax.
5. Small businesses with turnover less than N25m to be FULLY exempted from Companies Income Tax (CIT) & entities with less than N25m in turnover are exempted from VAT registration.
6. A CIT rate of 20% applies to medium-sized companies with a turnover between N25m and N100m. It’s a boost for SMEs.
7. The law will now allow use of EMAILS as a communication medium with tax institutions – FIRS & State Revenue Agencies.
8. Early payment of Company Income Tax is incentivised with a deduction of 2% of tax payable (medium-sized companies) and 1% for large companies.
9. The Value Added Tax is proposed to increase from 5% to 7.5%. The 2020 Budget projections are based on this new increase. States & LGAs benefit more from VAT increase.
10. Stamp duty on bank transfers will apply to amounts of N10,000 and above. Transfers between the same owner’s accounts in the same bank will be exempted. Electronic bank transfers included.