This is to commend Mr. President and the Minister of Finance on the Finance Bill, 2019 (now Finance Act) which has been signed into law by the President. I do think if the startups reinvest the profits, growth will come, even marginally. It may seem little but that spirit of allowing some of these taxes to go is one way we can help startups and broad SMEs (small and medium scale enterprises). The SMEs need this help, as most are like local government areas in Nigeria, providing their electricity, potable water, security , etc needs. Sure, the VAT increase from 5% to 7.5% reduces the fun; nonetheless, it is moving in the right direction.
The Nigerian Financial Bill was recently passed by the Senate. While it awaits the assent of the president, the Minister of Finance, Budget and National Planning, Zainab Ahmed, said the Bill will exempt companies and businesses with turnovers less than N25 million from Companies Income Tax (CIT)
She added that companies with turnovers of N25 million to N100 million yearly will be paying 20 percent as Companies Income Tax, but those earning over N100 million will pay 30 percent of their profit as income tax.
Presently, all companies are required to part with 30 percent of their profit as CIT to the Federal Government, but the Minister said there is going to be consideration to businesses earning less to enable them to expand.
Andersen Tax has some brief explanations:
the increase of the VAT rate from 5% to 7.5%;
the introduction of a N25 million VAT compliance threshold;
the exemption of companies with less than N25 million annual turnover from payment of CIT;
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 CIT Act; and
imposition of excise on certain imported products.