Paying taxes is one of the four parameters that need major reform in the Ease of Doing Business in Nigeria. A taxpayer in Nigeria needs 347.4 hours to complete the tax compliance cycle which makes the country ranks as 159th out of 190 economies. Research also shows that a higher amount of government control in a sector often makes it more difficult for businesses to thrive. Henceforth, businesses operating in Nigeria can now say bye-bye to some old tax provisions from the year 2020. Thanks to President Muhammadu Buhari who signed the 2019 Finance Bill into law today. The Senate introduced the Bill together with the 2020 Budget to reform Nigeria’s tax laws to align with global best practices, support MSMEs in line with Ease of Doing Business, attract investments in infrastructure and capital markets, and raise government revenues. The Finance Bill signed into law contains significant changes to seven (7) different tax laws. A selection of striking updates in three of the laws are:
1. Companies Income Tax (CIT)
- CIT rate is on a progressive scale and depends on three levels of a company’s turnover. First, small enterprises will no longer pay company income tax as the new rate is 0%. Second, medium-sized companies will pay CIT at a rate of 20%. Third, other companies liable to CIT will continue to pay at 30%.
- Also, no more double tax as commencement and cessation rules have been deleted.
- Given the rise of technology, businesses can now render services from overseas to a tax resident in Nigeria. CIT provisions now include the taxation of offshore entities involved in digital services that have significant economic presence in Nigeria.
2. Personal Income Tax (PIT)
To open and operate a corporate bank account, financial institutions must collect the tax identification number (TIN) of individuals.