Article authored by Olayinka Alao, Managing Partner of Renaissance Practice
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
The increase of the Valued Added Tax (VAT) rate from 5% to 7.5%;
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;
The exemption of companies with less than N25 million annual turnover from payment of Companies Income Tax;
Expansion of the scope of companies taxable in Nigeria to include companies that operate within the Nigeria digital space, among others;
Requirement of a tax identification number for opening of bank accounts or continue operation of existing bank account;
Provision of exceptions for the application of excess dividend tax under Section 19 of the Companies Income Tax Act;
Imposition of excise on certain imported products.
Reduction of the Withholding Tax rate on road, bridges, building and power plant construction contracts from 5% to 2.5%.
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.