The Finance Act of Nigeria was on December 31st, 2021 signed into law by President Muhammadu Buhari and effectively serves as an amendment to a number of laws that include the Companies Income Tax Act CITA, the Personal Income Tax Act (PITA) , the Customs and Excise Tariffs Act, the Capital Gains Tax Act (CGTA), & the Tertiary Education Trust Fund Act .
The act was created to bring a more streamlined and effective improvement of Nigeria’s economic system through the development of a uniformly ascertainable Tax regime across all sectors of the economy as well ensure greater fiscal policy at the state policy level.
This article will be looking at the most important provisions of this act and their implications for the Nigerian Economic going forward. The provisions of the act that will be looked at for the purpose of this article are as follows:-
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Data Protection :- Under the Finance Act, Taxpayer information is now deemed secret and private and as such requiring utmost confidentiality and protection in line with the Nigerian Data Protection Regulations.
Non-Resident Digital Company Taxes :- Under this act, the Federal Inland Revenue Service (FIRS) is now charged with assessing company income tax on businesses not based in Nigeria but engaged in rendering digital services ranging from communications even via advertisments to e-commerce and Fintech services.
Dividends for the Purposes of Company Income Tax :- Under the act, the previous practice under the CITA of compensating payments received or paid in regulated securities exchange transactions (RSLT) has been stopped.
Capital Gains Tax :- Capital Gains Tax rates are now fixed at a 10% rate on gains made from the sale of shares in Nigerian companies except where proceeds from such sales are used to purchase shares of any company.
Minimum Tax Rate Reductions :- Under the Finance Act, Minimum Tax rates have been reduced to 0.25% of gross sales for the period of January 1, 2020 – December 31, 2021.
Tertiary Education Tax Rates :- Under the Act, Tertiary Education Tax rates have been placed at 2.5% for registered Nigerian companies excluding small businesses.
Non-Alcoholic Beverages/Sweetened Beverage Taxes :- Under the Finance Act amending the relevant provisions of the Customs and Excise Tariffs Act, an excise duty of 10 Naira per litre is now payable for businesses engaged in the manufacturing of soft drinks and Non-Alcoholic Beverages. This tax was announced by the Nigerian government as a stop-gap measure aimed at consumption reduction of such drinks due to their negative health effects.
State Borrowing :-Under the Finance Act, governments in Nigeria can now engage in borrowing for purposes of reforms or projects having major national importance at low interest rates.