THE 2020 FINANCE ACT; 25 Key Changes To Take Note Of.

The Finance Act 2020 became effective from 1st January, 2020. Below are the 25 key changes brought about by the Finance Act:

  1. All corporate organizations are required to maintain books or records of accounts with sufficient information on their transactions. Failure to submit these records to the Federal Inland Revenue Service (FIRS) will attract a Company Income Tax Act (CITA) penalty of ₦100,000 in the first month, and monthly ₦50,000 in subsequent months of default.
  2. The flight tickets of Nigeria-registered commercial airlines are now Value Added Tax (VAT) exempt.
  3. Nigeria registered commercial airlines can now import their aircrafts, engines, spare-parts, and components import duty and VAT free.
  4. Minimum Company Income Tax (CIT), also known as Minimum Tax, will be 0.25% for the year of assessments that fall within 1st January, 2020 and 31st December, 2020.
  5. Hire or Lease of tractors, ploughs and other agricultural equipment for agricultural purposes is now VAT-Exempt.
  6. Import duties on tractors motor vehicles for the transportation of more than ten persons, and motor vehicles for the transportation of goods has been reduced to 35% to 5%, 10% and 10% respectively. Import duty on cars has been reduced from 30% to 5%.
  7. Companies can now claim capital allowance on the cost of software or applications development or acquisition.
  8. Small companies are now exempted from Tertiary Education Tax
  9. Compensation for loss of office up to ₦10m is exempted from tax. Any excess above N10m is liable 10% CGT to be remitted within the time specified under the PAYE Regulations.
  10. Employees whose Gross Income equals the National Minimum Wage, are now exempt from Personal Income Tax (PIT).
  11. Companies that benefit from the Gas Utilization Incentive under the CITA, cannot enjoy the Pioneer Status Incentive under the Industrial Development (Income Tax Relief) Act or any other gas utilization incentive under the Petroleum Profit Tax Act (PPTA).
  12. Corporate donations to any fund set up by Federal or State Governments to support the fight against pandemics, natural disasters or other exigencies are now deductible for CIT purposes. The deductible donations are however capped at 10% of the company’s assessable profit after the deductions of other allowable donations.
  13. There is now an Electronic Money Transfer (EMT) Levy of N50 on the transfers of ₦10,000 and above with any financial institution. The rule that exempted transfers between accounts of the same owner in the same bank from stamp duty is now deleted. The proceeds from the EMT Levy will; be shared on the basis of derivation: 15% to the Federal Government (FG) and Federal Capital Territory (FCT), while the remaining 85% goes to the State Government.
  14. Telecommunication services will suffer Excise Duty as the President of Nigeria may order
  15. Interest payable on loans given to primary production in agricultural companies are now CIT-exempted. To qualify for this, the loans must have a 12-months moratorium and the applicable interest should not be less than the base lending rate.
  16. The potential 8-year CIT-exemption granted to primary production agricultural companies under the Finance Act 2019 has been removed. A potential 6-years Pioneer Status Incentive has now been provided for small and medium sized primary production agricultural companies.
  17. Like Nigerian companies, non-resident companies with significant economic presence in Nigeria are required to file their CIT Returns with FIRS.
  18. Nonresident companies and individuals who earn income on which withholding tax is the final tax are exempted from filing CIT and PIT Returns, respectively.
  19. Businesses or enterprises in the Nigeria Export Processing Zones and Oil & Gas Export Zonesnow have the obligation to file their CIT Returns with the FIRS.
  20. Intangibles or incorporations are now, for VAT purposes, classified as ‘services’ and no longer goods.
  21. Capital Gain Tax is now due and payable twice annually: on or before June 30 and December 31. Accordingly, all CIT liable transactions should go through the process of filed returns and the making of relevant payments on or before the said dates.
  22. Businesses that are taxable under the Personal Income Tax Act (PITA) will now be subject to the anti-double tax commencement and cessation rules that apply to companies that are taxable under CITA. 
  23. Tax Appeal Tribunal can now hear and determine tax disputes on virtual platforms. 
  24. FIRS may, in the case of small and medium companies, dispense with the requirements of audited financial statements accompanying the CIT Returns. FIRS may by notice, specify the form of information.
  25. FIRS is empowered to deploy proprietary technologies for the automation of tax administration(assessment, returns filing and payment), including for the collection of taxes from online international supply of services to Nigeria.

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