On 7 December 2021, President Muhammadu Buhari released the Finance Bill 2021 (FB 2021) to the National Assembly for passage. Finance Bill 2021 seeks to amend and introduce relevant tax and fiscal laws for macroeconomic policy reforms and public financial management of Nigeria.
FB 2021 proposes changes to some provisions in twelve (12) laws. They are Capital Gains Tax Act, Companies Income Tax Act, Federal Inland Revenue Service (Establishment) Act, Finance (Control and Management) Act, Fiscal Responsibility Act, Insurance Act, National Agency for Science and Engineering Infrastructure Act, Nigerian Police Trust Fund (Establishment) Act, Personal Income Tax Act, Stamp Duties Act, Tertiary Education Trust Fund (Establishment, etc.) Act, and Value Added Tax Act.
The major highlights of the Finance Bill 2021 in Nigeria are:
2. New rules for taxation of lottery and gaming businesses such as income taxable and allowable deductions.
3. Introduction of conditions to claim incentive on downstream gas utilisation projects. The provision clarifies the eligibility of companies engaged in two or more petroleum operations.
4. A restriction of capital allowance for a company with taxable and non-taxable operations. The qualifying capital (QCE) is pro-rated when the QCE is partly used to generate taxable income. Only the portion for the taxable income is an allowable deduction. The rule applies when the proportion of non-taxable income is more than 20% of the total income of the company.
5. Additional scope of the Federal Inland Revenue Service (FIRS) includes the power to assess companies with a significant economic presence in Nigeria to income tax on deemed profit basis. FIRS will be the sole agent of the Federal Government (FG) for administering, assessing, collecting, and enforcing taxes and levies payable to the FG.
6. A new capital gains tax (CGT) rate of 5% on the gains from disposing shares in a Nigerian company where the gross proceed in 12 consecutive months is higher than ₦500million. The rule will not apply where a person uses the proceeds to buy shares of the same or other Nigerian company in the same assessment year.
7. Gains on the disposal of Nigeria Government shares and stocks, as well as gains from transfer of shares in a regulated securities lending transaction are exempt from CGT.
8. Minister of Finance can make regulations to audit, account, allocate and distribute electronic money transfer levies and stamp duties between the 2015 and 2019 fiscal years. The regulation is subject to the approval of the National Assembly.
9. Under the Insurance Act, the definition of admissible assets and capital requirement for an insurance business.
10. Tertiary Education Tax (TET) rate is now 2.5% (Formerly 2%).
11. Lower time of 30 days, formerly 60 days, to pay Tertiary Education Tax (TET).
12. Appointment of the FIRS as the relevant agency to assess, collect and enforce the payment of the Nigerian Police Trust Fund levy.
13. FIRS can appoint an agent for value added tax collection.