President Muhammadu Buhari Signs Finance Bill Into Law.

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A few days ago, President Muhammadu Buhari signed the Finance Bill into law, hoping it would support the implementation of the 2020 budget. We recall the bill specified certain key objectives which it intends to achieve upon ratification and these were re-emphasised by the president in the tweet from his official account. They include:

  • Encourage investments in infrastructure and capital markets
  • Increase government revenues.
  • Support Micro, Small and Medium Scale Enterprises in line with the Ease of Doing Business Reforms.

The bill provides for significant adjustments to key tax laws aimed at boosting federal government revenue profile while supporting state governments to meet the new minimum wage revision. On Companies Income Tax (CIT) Act, the new Finance Bill provides a wider tax base for Non-Resident Companies (NRCs) following the introduction of provisions that create taxable presence for NRCs carrying on digital activities, consultancy, technical, management or professional services in Nigeria provided they have “significant economic presence”.

The definition of “significant economic presence” however remains unclear with the minister having the prerogative to determine that. Another significant adjustment made on the CIT act is the recategorization of companies for CIT payments. Small companies (Turnover up to N25m) are not required to make CIT payments while medium companies (Turnover > N25m but < N100m) will be charged 20%. Large companies (Turnover > N100m) will continue paying the previous 30% tax rate for CIT. The amendments also specify companies must now pay a minimum tax.

Another major highlight of the finance bill is the revision of Value-Added Tax rate from 5% to 7.5%.

Author: Austine