Tax Incentives And Reliefs Available In The Finance Act 2019


Tax Incentives And Reliefs Available In The Finance Act 2019

With effect from 1st February 2020, the new Finance Act 2019 came into force, among the provisions of the Act are some incentives to stimulate the business environment for economic growth and development.

Below are the new tax incentives and tax reliefs introduced by the Finance Act 2019.

I.  Companies Income Tax Act (CITA)

1.  Indefinite relief of losses for insurance businesses;
2.  Exemption of Companies Income Tax on the profits of any company with gross turnover N25 million and below;
3.  Reduced Companies Income Tax rate of 20% for medium-sized businesses with turnover above N25 million but below N100 million;
4.  Rental income and dividend received by authorised REIC are exempt from WHT;
5.  Payments made by a Borrower to a Lender in a SEC approved Security Lending Transaction as compensation for loss of interest or dividend are exempted from CIT;

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6.  Introduction of a new exemption regime of Eight (8) years tax holiday for Agricultural production to encourage crop production and animal husbandry;
7.  Exemption of profits of a Nigerian company in respect of goods exported from Nigeria to the extent of the portion of such proceeds repatriated and used for the purchase of raw materials, plant, equipment and spare parts;
8.  Compensating payments received by a Lender from its approved agent or a Borrower in a Regulated Securities Lending Transaction will be Franked Investment Income and shall not be subjected to further tax in the hands of the Lender.
9.  Exemption of income tax on compensating payments received by an approved agent from a Borrower or Lender on behalf of a Lender or Borrower in a Regulated Securities Lending Transaction;
10.  Dividends or mandatory distributions made by a Real Estate Investment Company duly approved by the Securities and Exchange Commission, to its shareholders shall be regarded as an expense and tax-deductible;

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11.  Compensating payments made by a Lender to its approved agent or a Borrower in a Regulated Securities Lending Transaction shall also be regarded as an expense and will be tax-deductible;
12.  Modification of the commencement and cessation rule to ensure overlapping income are not taxed twice during commencement and cessation of businesses;
13.  Transfer of asset at Tax Written Down Value (TWDV) for related entities undergoing reorganisation for better performance; provided they have been related for 365 days and remain so for another 365 days after the reorganisation.
14. Introduction of indefinite carry forward of losses for all class of businesses in Nigeria;
15.  Exemption of small companies (with a turnover of N25m and below) from payment of minimum tax;
16.  Cancellation of pre-operation levy before obtaining a Tax Clearance Certificate (TCC) by a company that is yet to commence business;

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17.  Cancellation of tax payment on interim dividend;
18.  Provisional tax payment is no longer applicable;
19.  Introduction of 2% and 1% of tax paid as Bonus to small and medium taxpayers respectively, to encourage early payment of taxes, when paid not later than 90 days before the due date.
20.  Exemption of WHT on compensating interest from Lender to approved agent for the benefit of the Borrower paid under a Security Lending Transaction;
21.  Exemption of WHT on dividend payments/distributions from REIT to REIC;

II.  Value Added Tax Act (VATA)
1. Exemption of small companies (with taxable supplies of N25million and below) from charge, collection, remittance and filing of monthly VAT returns;
2. Introduction of a provision to allow taxpayers to carry forward excess VAT as a credit against future VAT liabilities;

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3. Exemption of VAT for related entities undergoing reorganisation for better performance; provided they have been related for 365 days and remain so for another 365 days after the reorganisation;
4. Exemption of securities from VAT;
5. Expansion of the scope of exempted items listed in the First Schedule of the VAT Act to reduce the VAT burden on the poor in view of the increase in the VAT rate and to ensure that goods and services of basic necessities are not liable to VAT;
6. Exemption of VAT on Locally manufactured sanitary towels, pads or tampons;
7. Exemption of VAT on Services rendered by Microfinance Institutions;
8. Exemption of VAT on Tuition relating to a nursery, primary, secondary, and tertiary education.

III.  Personal Income Tax Act (PITA)

1.  Exemption of tax on "Gratuities payable to an employee in the private sector in respect of services rendered by him under a contract of service with his employer and described as gratuities either in the contract or some other document issued by or on behalf of the employer in connection with such contractor". (P. 6(b) of the third schedule to PITA).

IV.  Capital Gains Tax Act (CGTA)

1.  Exemption of "Sums obtained by way of compensation for loss of office shall not, however, be chargeable gains, except where the amount of such compensation or damages exceeds N10,000,000 in any year, of assessment." (S. 36(2) of CGTA)

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V.  Stamp Duties Act (SDA)

Exemption of stamp duties on the following:
1.  Transfer and deposit of money below N10,000;
2.  Transfer and deposit of money by a person to its personal account;
3.  Receipts given by any person in a Regulated Securities Lending Transaction carried out under regulation issued by the Securities and Exchange Commission"; and Shares, stocks or securities transferred by a Lender to its approved agent or a borrower in furtherance of a Regulated Securities Lending Transaction.
4.  Shares, stocks or securities returned to a Lender or its approved agent by a borrower in a Regulated Securities Lending Transaction.
5.  All documents relating to a regulated securities lending transactions issued by the Securities and Exchange Commission."

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