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Highlights of the Nigerian Finance Act 2020

posted 4 years ago

Article authored by Olayinka
Alao, Managing Partner of Renaissance Practice

Introduction

On 13 January 2020, President Muhammadu Buhari
signed the Finance Bill, 2019 (now Finance Act) into law. The Finance Act was
specially designed to support the implementation of the 2020 National Budget
and to create an enabling environment for businesses.

Notable Provisions of the Finance Act 2020

  1. The
    increase of the Valued Added Tax (VAT) rate from 5% to 7.5%;
  2. The
    introduction of a N25 million VAT compliance threshold: meaning that
    companies with an annual turnover of N25 million or less are exempt from
    registering for the tax, charging the tax, rendering a monthly return of
    its sales and purchases and from the penalties prescribed by the Act for
    non-compliance;
  3. The
    exemption of companies with less than N25 million annual turnover from
    payment of Companies Income Tax;
  4. Expansion
    of the scope of companies taxable in Nigeria to include companies that
    operate within the Nigeria digital space, among others;
  5. Requirement
    of a tax identification number for opening of bank accounts or continue
    operation of existing bank account;
  6. Provision
    of exceptions for the application of excess dividend tax under Section 19
    of the Companies Income Tax Act; 
  7. Imposition
    of excise on certain imported products.
  8. Reduction
    of the Withholding Tax rate on road, bridges, building and power plant
    construction contracts from 5% to 2.5%.

Conclusion

Every new law comes with its challenges and
opportunities, therefore existing businesses and prospective investors should
seek professional guidance to enable them understand how the Finance Act will
impact their business operations going forward and any new compliance
requirements to be fulfilled or benefits to be enjoyed regarding their tax
obligations in Nigeria. We at Renaissance Practice are well positioned to give
robust advice on the nitty-gritty of the Finance Act and its impacts on the
entire gamut of business activities.

Author

posted 6 days ago

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