18 Things You Need To Know About The 2019 Finance Bill

The Finance Bill, 2019 submitted by President Muhammadu Buhari, to the National Assembly on 14 October 2019 passed its second reading on Wednesday, 6 November 2019. The following are the 18 things you need to know about the 2019 Finance Bill.

1. Introduction of a specialized tax framework for securities lending transactions.

2. Introduction of the principle of Significant Economic Presence (SEP) to the basis of taxation of non-resident companies operating in the digital services and ecommerce sectors.

3. Amendment of Section 16 of CITA to place insurance companies on the same level with companies in other sectors by deleting provisions on restriction of deductible claims and outgoings to percentage of total premium; restriction of period to carry forward tax losses to four years; special punitive deemed profit basis for minimum tax computation restriction of deductible unexpired risk and introduction of time-apportionment basis.

4. Elimination of double taxation risks by exempting dividends paid out of retained earnings that have suffered tax under CITA, Petroleum Profit Tax Act (PPTA) and Capital Gain Tax Act (CGTA); exempted profits/income; franked investment income; and rental income received by Real Estate Investment Companies for distribution to their shareholders.

5. Simplification of the rules for computing taxes for commencement and cessation returns.

6. Limitation of the basis for minimum tax computation to turnover, exemption of companies with a gross annual turnover of less than NGN25 million from minimum tax.

7. Removal of the minimum tax exemption granted to companies with 25% imported equity.

8. Early payment bonus of 2% and 1% for medium-sized and large companies respectively where Companies Income Tax (CIT) liabilities are paid before 90 days to the due date of filing/payment.

9. Restriction on tax exemption on foreign loans. The maximum exemption obtainable will be 70% as against the current 100%.

10. Introduction of BEPS Action 4 recommendation on interest limitation. The maximum interest expense deduction allowable is 30% of Earnings Before Interest, Tax, Depreciation and Amortisation (EBITDA) in any given tax year. Deductible interest expense not fully utilized can be carried forward for a maximum of 5 years.

11. Increase in the penalty for late filing of CIT and VAT returns to NGN50,000 for the first month and NGN25,000 for each subsequent months of default.

12. Increase in VAT rate from 5% to 7.5%.

13. Imposition of obligation on Nigerian customer of a Non- Resident Company (NRC) to self-account for the VAT.

14. Exemption of companies with an annual turnover of NGN25 million or less from VAT registration and filing obligations.

15. Expansion of the definition of goods to include intangible products, property and assets (but excluding land).

16. Expansion of the list of exempt items to include basic food items (stipulated as agro and aqua based staple foods) such as additives, cereals, cooking oils, culinary herbs, fish of all kinds (other than ornamented), flour and starch, fruits, live or raw meat and poultry, milk, nuts, pulses, roots, salt, vegetables, and water; locally manufactured sanitary towels; tuition (primary, secondary and tertiary education);and services rendered by Microfinance Banks.

17. Amendment of the definition of exported service to mean -"a service rendered within or outside Nigeria by a person resident in Nigeria to a person resident outside Nigeria, provided that a service provided to a fixed base or permanent establishment of a non-resident person in Nigeria shall not qualify as exported service"

18. Deletion of tax relief for children and dependent relatives from the Personal Income Tax Act.

You can Download a copy of the Finance Bill 2019 here

Written By
Victor Adegite ACA, ACTI
Senior Manager,Tax and Transfer Pricing at KPMG Advisory Services