Category: Finance Act 2021

Under the Personal Income Tax Act (PITA), part of the Personal Reliefs prior the Finance Act 2021, were allowances for , “annual amount of any premium paid by the individual during the year preceding the year of assessment to an insurance company in respect of insurance on his life or the life of his spouse, or of a contract for a deferred annuity on his own life or the life of his spouse”.

The Finance Act 2021 has specifically removed from the provision, the clause, “or of a contract for a deferred annuity on his own life or the life of his spouse”, which might imply (in form) that premiums paid for deferred annuity contracts are now no longer allowed as reliefs or deductible expenses.

In substance however, one may argue that since the term ‘Premium’ includes both the purchase price of a life insurance policy AND, the payments required by an insurer to provide deferred annuity cover; and both premiums are paid to insurance companies, then this relief (on premiums paid for deferred annuity contracts) is still covered under the current provision of the law.

For further enquiries, discussion, advisory or help around complying with these new laws, please send us an email via clients@vi-m.com. You will be able to access all our explanatory write-ups on each of the major changes to the laws, brought about by the Finance Act 2021 and the practical ways in which they will affect taxpayers going forward, under our website group link – https://www.vi-m/category/Finance-Act-2021.

Under the Finance Act 2021, a new Levy – NASENI levy, has also been introduced. 

This Levy can be likened to the NITD levy.

This Levy is to be assessed at the rate of 0.25% of the profits before tax of companies engaged in the business of banking, mobile telecommunication, ICT, aviation, maritime and oil and gas with turnover of N100 million and above.

This tax is also to be administered by the Federal Inland Revenue Service (FIRS).

For further enquiries, discussion, advisory or help around complying with these new laws, please send us an email via clients@vi-m.com. You will be able to access all our explanatory write-ups on each of the major changes to the laws, brought about by the Finance Act 2021 and the practical ways in which they will affect taxpayers going forward, under our website group link – https://www.vi-m/category/Finance-Act-2021.

Under the Finance Act 2021, the rate of tax for tertiary education trust fund (or tertiary education tax) has now been increased from 2% of assessable profits to 2.5% of assessable profits of Nigerian companies.

Also, the payment window, in a situation where the Federal Inland Revenue Service serves a notice of assessment of this tax on a company, has now been reduced from 60 days to 30 days.

This is one of the most popular provisions of the Finance Act 2021 because it places an additional tax burden on taxpayers. Fortunately, this tax is only payable by the small percentage of Nigerian businesses which are registered / incorporated as companies. 

Businesses registered as business names and small companies making below N25m per annum are still exempted from paying this tax.

For further enquiries, discussion, advisory or help around complying with these new laws, please send us an email via clients@vi-m.com. You will be able to access all our explanatory write-ups on each of the major changes to the laws, brought about by the Finance Act 2021 and the practical ways in which they will affect taxpayers going forward, under our website group link – https://www.vi-m/category/Finance-Act-2021.

The Finance Act 2021 clarifies that small companies (making N25 million or less annual turnover) and medium companies (making 25m and above but less than N100m) are expected to compute capital allowances on their qualifying capital expenditures in the years in which they are exempt from tax (or have reduced tax rate as in the case of medium companies). But such capital allowances and any capital allowance brought forward into or within the tax free years or tax reduced years will be deemed to be fully utilised within those years.

No such capital allowance unutilised or unabsorbed will be allowed to be carried forward to the periods when these companies will become fully taxable at 30%.

Only the residual values of the assets or qualifying capital expenditure (if any) can be carried forward for possible capital allowance computations and claim beyond the tax exempt periods.

For further enquiries, discussion, advisory or help around complying with these new laws, please send us an email via clients@vi-m.com. You will be able to access all our explanatory write-ups on each of the major changes to the laws, brought about by the Finance Act 2021 and the practical ways in which they will affect taxpayers going forward, under our website group link – https://www.vi-m/category/Finance-Act-2021.

Gains from disposal of shares of a Nigerian company which was previously exempt from Capital Gains Tax at 10%, is now no longer expressly exempted. 

The following conditions would now have to be fulfilled before this exemption from tax can apply:

1.The proceeds from disposal of such shares are re-invested in purchasing any Nigerian company shares. Proceeds not re-invested will be taxed proportionately.

2.The cumulative proceeds (not just gains) from disposal, in any 12 consecutive months is less than N100million and the person (company or individual) making the disposal will render appropriate returns of tax authority every year.

3.The shares are transferred between an approved Borrower and Lender in a regulated Securities Lending Transaction.

For further enquiries, discussion, advisory or help around complying with these new laws, please send us an email via clients@vi-m.com. You will be able to access all our explanatory write-ups on each of the major changes to the laws, brought about by the Finance Act 2021 and the practical ways in which they will affect taxpayers going forward, under our website group link – https://www.vi-m/category/Finance-Act-2021

A new Excise Duty has now been introduced in the Customs, Excise Tariffs, Etc. (Consolidation) Act on non-alcoholic, carbonated and sweetened beverages, at a specific rate of N10 per litre.

The definition (as well as the economic/ fiscal implications of this new Duty) is broad, as most soft drinks and even non-alcoholic wine are carbonated and sweetened. 

Consumers of such drinks must also begin to anticipate increases in their retail prices.

The government says this Duty is levied to discourage Nigerians from excessive Sugar consumption. Do you agree with this opinion?

For us, there are no credible statistics to prove that the average Nigerian consumer of carbonated sweetened drinks suffers from excess blood-sugar based ailments, neither is there any established figure or statistic that points to carbonated sweetened drinks intake as the major cause (if any) of excess sugar consumption in Nigerians. There are several other factors too to consider, e.g demographics of carbonated sweetened drinks consumers in Nigeria; the fact that clean water is not available to every Nigerian and these carbonated drinks provide the necessary refreshments to quench thirst safely in the interim; the consideration that local sugar production and supplies is not even enough for the sugar needs of Nigerians and lastly, the possibility of regulating sugar contents in carbonated sweetened drinks, rather than imposing excise duty on it.

For further enquiries, discussion, advisory or help around complying with these new laws, please send us an email via clients@vi-m.com. You will be able to access all our explanatory write-ups on each of the major changes to the laws, brought about by the Finance Act 2021 and the practical ways in which they will affect taxpayers going forward, under our website group link – https://www.vi-m/category/Finance-Act-2021.

Under the Finance Act 2021, the Federal Inland Revenue Service (FIRS) can now deploy their proprietary or third party technology directly to the taxpayers’ systems (after 30days notice) for the purpose of tax administration or gathering of information.

Banks are required to submit quarterly returns of new accounts or other information to both the FIRS and the State tax authorities as required by such tax authorities, failure for which penalty of N1million will apply for each return not submitted or incorrectly submitted.

It is now an offence punishable by a fine of N10m, imprisonment or both, for any agency of the Federal Government (other than FIRS) or any of their staff or consultant, to administer, assess or collect any taxes and levies due to the Federal Government. When this provision is applied comprehensively, it might mean that even customs duties and associated taxes would only be collectible by the FIRS and no longer Customs.

Any person employed in the Service or otherwise that has access to taxpayer information is under a strict legal obligation to keep such information confidential.

FIRS is vested with the duty to assess, collect, account and enforce the payment of the Nigeria Police Trust Fund Levy. The levy is 0.005% of the net profit of companies operating business in Nigeria.

For further enquiries, discussion, advisory or help around complying with these new laws, please send us an email via clients@vi-m.com. You will be able to access all our explanatory write-ups on each of the major changes to the laws, brought about by the Finance Act 2021 and the practical ways in which they will affect taxpayers going forward, under our website group link – https://www.vi-m/category/Finance-Act-2021.

Under the Finance Act 2021, profits of companies engaged in educational activities will now be liable to companies income tax due to the removal of ‘educational activities’ from the exempt provisions of Section 23(1)(c) of CITA.

Over many years, particularly since the surge in establishment of ‘for profit’ private schools, it has been subject of controversy and debate (due to this previous exemption), whether the profits of such companies would be subject to income tax. 

But please note that this provision applies only to schools/organisations engaging in educational activities that are registered/ incorporated as companies. Not all schools or firms engaged in educational activities are incorporated as companies as many of them are still operating under the umbrellas of NGOs and religious bodies, while others are registered as business names. This distinction is necessary, before this provision of the law can be applied.

For further enquiries, discussion, advisory or help around complying with these new laws, please send us an email via clients@vi-m.com. You will be able to access all our explanatory write-ups on each of the major changes to the laws, brought about by the Finance Act 2021 and the practical ways in which they will affect taxpayers going forward, under our website group link – https://www.vi-m/category/Finance-Act-2021.

Under the Finance Act 2021, there are new rules pertaining to how non-residents are subjected to CIT and VAT.

Under the CIT amendment – Non-resident companies liable to tax on profits arising from providing digital goods or services to Nigerian customers under the Significant Economic Presence (SEP) Rule may be assessed on fair and reasonable percentage of their turnover (6% effective tax rate on turnover) in the event that there is no assessable profit, the assessable profit is less than what is to be expected from that type of trade or business, or the assessable profit cannot be ascertained.

Under the VAT amendment – Non-resident Suppliers of taxable goods or services to Nigeria (more especially, digital goods), or any other person appointed by the Service to collect tax under the VAT Act, have statutory obligation to collect the VAT and remit same to the Service. This eases some tax compliance burden from the Nigerian buyers of these taxable goods and services. In this regard, notice that many digital platforms now include VAT on their bills to Nigerian users of their digital services.

For further enquiries, discussion, advisory or help around complying with these new laws, please send us an email via clients@vi-m.com. You will be able to access all our explanatory write-ups on each of the major changes to the laws, brought about by the Finance Act 2021 and the practical ways in which they will affect taxpayers going forward, under our website group link – https://www.vi-m/category/Finance-Act-2021.

The Finance Act 2021, the third in a three-year period, has now been issued and signed into law, to complement Nigeria’s 2022 Budget. Through the Finance Acts, the Federal government strategically amends certain provisions of selected laws to achieve its desired fiscal goals.

Nigeria’s Finance Act 2021:

• makes 40 amendments to 13 tax and related laws.

• became effective from 1 January 2022.

We have taken time to prepare explanatory write-ups on each of the major changes to the laws, brought about by the Finance Act 2021 and the practical ways in which they will affect taxpayers going forward.

We will now publish them one after the other in separate blog posts on this website. You will be able to access all of them at once under the group link – https://www.vi-m/category/Finance-Act-2021