2020 Finance Bill- Nine “Bright Sides” for Owners of Business

finance bill

The Finance Bill, 2019 (the Bill), presented alongside the 2020 proposed budget to a joint session of the National Assembly on 8 October 2019 by President Muhammadu Buhari, has been approved without amendment. In his words, "the objectives are to promote fiscal equity by mitigating instances of regressive taxation; reforming domestic tax laws to align with global best practices and introducing tax incentives for investments in infrastructure and capital markets. Supporting Micro, Small and Medium-sized businesses in line with our ease of doing Business Reforms; and raising revenue  for the government.”  The Nigeria Tax jurisdiction is about to experience sweeping changes, below are promising bright sides for Nigerian small-medium businesses. 

  1. The Finance Bill will make amends to the VAT rate and legally recognize 7.5% as Nigeria's VAT rate.
  2. The bill exempts MSMEs from VAT registration, pegging it below N25 million in turnover per year. The government said this will allow revenue authorities to focus their compliance efforts on larger businesses.
  3. SMEs doing below N25 million turnover yearly are exempted from paying minimum and company income tax.
  4. Medium-sized companies with a whooping N25 – N100million turnover will now pay a lower rate of  20% Company Income Tax (CIT) rate as against 30%.

  5. To avoid overlaps, double taxation, and complications during commencement, commencement and cessation rules will be modified.

  6. A  2% percent bonus is applicable to all medium-sized companies and 1% to the large-sized companies on early CIT payment.

  7. Minimum tax provisions amended to 0.5% of turnover and exemption only applies to small companies (less than 25m turnover), so non-resident companies will now pay minimum tax.

  8. The N50 Stamp duty on bank transfer to apply only on the amount from N10,000 and above. Transfers between the same owner’s accounts in the same bank also to be exempted.

  9. Insurance companies can now carry forward tax losses indefinitely, deduct reserve for unexpired risks on time apportionment bases while special minimum tax for insurance has been abolished.

Policies & Procedures

  • Banks would request for Tax Identification Number (TIN) from all individuals to open bank accounts and existing account holders must provide their TIN if they would continue to operate their accounts.

  • Email correspondences to be recognized for communicating with tax authorities.

  • A VAT registration threshold of N25 million turnover in a calendar year would be introduced. 

  • VAT remittance would now be on a cash basis to reflect the difference between output VAT collected and input VAT paid in a preceding month.

  • There will be specific requirements for VAT deregistration for discontinuing operations.

  • Introduction of VAT reverse charge on imported services. The meaning of supply and definition of goods and services has been expanded to cover intangible items other than land, among others.

  • From August 26, 2019, the Bankers’ Committee Resolution requires businesses must waive their rights of confidentiality before a new loan can be accessed.

  • It is mandatory for Individuals and directors for corporate loans to provide their Bank Verification Number (BVN) and Tax Identification Numbers (TINs) for ease of identification of deposits with other banks and financial institutions.

You can talk to us on 09078422233,  should you have any concerns about the new tax measures.

 

 

Anu Ogunlowo

Anu Ogunlowo, Content Marketer| Copy writer at ikOOba Technologies. Former SEO analyst at Konga, online shopping mall. Gained customer intelligence as a customer service agent and moved to a chosen career path. She is an expert and ever-improving digital marketer, content strategist, SEO and Social media analyst.

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