Highlights of the Nigerian Finance Act 2020

Article authored by Olayinka
Alao, Managing Partner of Renaissance Practice

Introduction

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

1. The
   increase of the Valued Added Tax (VAT) rate from 5% to 7.5%;
2. 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;
3. The
   exemption of companies with less than N25 million annual turnover from
   payment of Companies Income Tax;
4. Expansion
   of the scope of companies taxable in Nigeria to include companies that
   operate within the Nigeria digital space, among others;
5. Requirement
   of a tax identification number for opening of bank accounts or continue
   operation of existing bank account;
6. Provision
   of exceptions for the application of excess dividend tax under Section 19
   of the Companies Income Tax Act; 
7. Imposition
   of excise on certain imported products.
8. Reduction
   of the Withholding Tax rate on road, bridges, building and power plant
   construction contracts from 5% to 2.5%.

Conclusion

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.