The Finance Act was signed into law in January 2019 to support Nigeria's 2020 budget and create a better business environment. It aims to promote fiscal equity, reform domestic tax laws, introduce incentives for infrastructure and capital markets, support small businesses, and raise government revenue. Key changes include increasing VAT from 5% to 7.5%, exempting small companies from CIT, expanding the scope of digital taxation, and requiring tax identification numbers for bank accounts. The new law affects various areas like VAT, stamp duties, personal income tax, capital gains tax, and company income tax laws. While it faced some criticism, the Finance Act provides incentives for small businesses and addresses issues like excess dividends tax.

1. THE FINANCE ACT
Implications and significant changes to tax laws
in Nigeria

2. THE FINANCE ACT
• The President Muhammadu Buhari on 13 January 2019,
signed the Finance Bill, 2019 (now Finance Act) into law.
This development was made public via his official twitter
account.
which is designed to
support the implementation
of the 2020 National
Budget and create good
environment for businesses

3. Objectives of the new law;
The new law seeks to achieve the following:
• Promote fiscal equity by mitigating instances of regressive
taxation;
• Reform domestic tax laws to align with global best practices;
• Introduce tax incentives for investments in infrastructure and
capital markets; transactions with significant economic
presence in Nigeria.
• Support small businesses in line with the ongoing ease of doing
business reforms;
• Raise revenue for government.

4. Effective Date
• The Bill was supposed to be signed into law in
December 2019 and take effect from 1 January 2020.
However, there was a delay due to the need for
harmonization of changes introduced by the
Legislature and a further vetting process by the
Executive.
• The Finance Bill (now an Act) cannot be implemented
based on speculations regarding its content and
effective date. Therefore changes will not take effect
until the new law has been published in the gazette or
otherwise officially made public.

5. Prominent Amendments
• the increase of the VAT rate from 5% to 7.5%;
• the exemption of companies with less than N25 million annual
turnover from payment of CIT;
• expansion of the scope of companies taxable in Nigeria to include
companies that operate within the Nigeria digital space, among
others;
• requirement of a tax identification number for opening of bank
accounts or continue operation of existing bank account;
• provision of exceptions for the application of excess dividend tax
under Section 19 of the CIT Act; and
• imposition of excise on some imported products.

6. Specific Laws that were affected
VAT
• Increase in VAT rate from
5% to 7.5%.
• The meaning of supply and
definition of goods and
services has been expanded
to cover intangible items
other than land, among
others
• Introduction of VAT reverse
charge on imported services
Stamp Duties Act
• Stamp duty of N50 will be
applied to items that
cumulatively worth N10,000
and above.
• Stamp duty on bank transfer
to apply only on amounts from
N10,000 and above
• Transfers between the same
owner’s account in same bank
are exempted

7. Specific Laws that were affected
Personal Income Tax Act
• Banks will request for TIN
before opening accounts for
individuals while existing
account holders will need to
get their TIN before
continual access to their
account.
• Conditions attached to tax
exemptions on gratuities
have been removed.
Capital Gains Tax Act
• Transfer of assets during
reorganization within a group
of companies would be
exempt from taxation.
• Compensation received for
loss of employment of up to
₦10million would be
exempted from taxation under
CGT.

8. Company Income Tax Act
1. Companies are now divided into three:
• A. Small companies (less than N25m revenue, CIT is 0%)
• B. Medium company (btw N25 and N100m revenue,
CIT is 20%)
• C. Big company (revenue above N100m, CIT is 30%)
2. Bonus of 2% of tax payable (medium-sized companies)
and 1% for large companies for early payment of CIT).
3. Expansion of the categories of exempt income to
include the profit of a small company and dividends
declared from small manufacturing companies.

9. HOW NIGERIANS REACTED TO THE ACT

10. HOW NIGERIANS REACTED TO THE ACT

11. IMPLICATION OF THE NEW ACT
• The finance Act now has the force law having received
presidential assent. Given that the Federal Government’s
Budget for 2020 relies on the Finance Act for its
implementation.
• But the law is not strictly focused on revenue , as it
provides a number of incentives for small businesses in
Nigeria and also addresses some pressing concerns such as
the issue of excess dividends tax, removal of
commencement and cessation rules for companies
commencing or exiting business operations in Nigeria.
• There is the removal of the four year restriction on losses
carried forward, exemption of capital gains from tax when
assets are transferred between related parties during
business reorganization

12. CONCLUSION
There is no perfect law that will favour every sector
and industry instead every new law comes with its
challenges and opportunities, therefore businesses
owners and prospective investors are advised to
get professional guidance to help 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.