Buhari signs Finance Bill into law; here are the changes

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Buhari signs Finance Bill into law; here are the changes made

The President, Major General Muhammadu Buhari (retd.), has signed the finance bill into law.

He made this known via his Twitter handle on Monday.

“I am pleased to announce that this morning I signed into law the Finance Bill, 2019,” he tweeted.

He said the Finance Bill would support the implementation of the 2020 Appropriation Bill.

He added, “This is the first time, since the return of democracy in 1999, that a Federal Budget is being accompanied by the passage of a Finance Bill specially designed to support its implementation, and to create a truly enabling environment for business and investment by the private sector.

“I thank the leadership and members of the Ninth National Assembly for the hard work and support that have gone into the passage of the landmark Deep Offshore and Inland Basin PSC Amendment Bill, and the Finance Bill; both vital to the successful implementation of the 2020 Budget.”

The bill is to set the tone for Nigeria’s fiscal policy for 2020, seeks to promote fiscal equity, align domestic laws with global best practices, and support Micro, Small and Medium-sized businesses.

Other major objectives of the Bill include increasing government revenues and stakeholder investments in investment/capital market through the introduction of incentives.

By signing this bill into law, it means that the following are now in full effect

Value Added Tax has increased from 5% to 7.5%

MSMEs below N25 million in turnover per year are exempted from Vat registration.

Tax on dividend distribution (excess dividend tax): the application of this tax is now only to untaxed profits that are not exempt from tax

30% tax on paid interim dividends no longer apply on dividends that are not paid in money. It may also imply that WHT should be applied on bonus shares or dividend-in-specie.

Commencement and cessation rules: commencement and cessation rules in CITA is now ammended

Anti-avoidance provisions for business reorganisation: to obtain the exemption, the entities involved should be part of a recognised group of companies 365 days before the transaction, and the relevant assets should not be disposed earlier than 365 days after the transaction. The Bill defines “recognised group of companies” as “…a group of companies as prescribed under accounting standards”.

Personal Income tax Act:

  • pension contributions no longer require the approval of the Joint Tax Board (JTB) to be tax-deductible;
  • tax exemption on withdrawals from pension schemes is now removed except the prescribed conditions are met;
  • Child relief (2,500 per child up to a maximum of 4) and dependent relief (2,000 per dependent for a maximum of 2) are now deleted;
  • Banks are now required to request for Tax Identification Number (TIN) before opening bank accounts for individuals, while existing account holders must provide their TIN to continue operating their accounts;
  • Emails are now accepted by the tax authorities as a formal channel of correspondence with taxpayers;
  • Penalty for failure to deduct tax now apply to agents appointed for tax deduction. This penalty is 10% of the tax not deducted, plus interest at the prevailing monetary policy rate of the Central Bank of Nigeria;
  • The conditions attached to tax exemption on gratuities have been removed. Therefore gratuities are unconditionally tax exempt;
  • The duties currently performed by the Joint Tax Board (JTB) as relates to administering the Personal Income Tax Act, is now being performed by the FIRS.

Value Added Tax (VAT)

Group reorganisationtax relief:

The Bill is introducing VAT exemption on Group reorganisations, provided that the

  • The sale is to a Nigerian company and it is for the better organisation of the trade or business;
  • The entities involved are part of a recognised group of companies 365 days before the transaction, and the relevant assets are not disposed earlier than 365 days after the transaction

Penalties

  • Penalty for VAT late filing of returns increased to N50,000 for the first month and N25,000 for subsequent months of failure;
  • The penalty for failure to register for VAT is reviewed upwards to NGN 50,000 for the first month of default and NGN 25,000 for each subsequent month of default;
  • The penalty for failure to notify FIRS of change in company address to be reviewed upwards to N50,000 for the first month of default and N25,000 for each subsequent month of default. This penalty also covers failure to notify FIRS of permanent cessation of trade or business.

Capital Gains Tax Act

Group reorganisation tax relief:

CGT exemption is now introduced on Group reorganisations, provided that the

  • Assets are sold to a Nigerian company and is for the better organisationof the trade or business;
  • The entities involved are within a recognisedgroup 365 days before the transaction, and the relevant assets are not disposed earlier than 365 days after the transaction

Commendably, far-reaching changes are made  to the tax laws covering seven different tax laws through the Finance Bill. Majority of the changes are expected to impacts positively on investments, ease of paying taxes especially for MSMEs and other sectors of the economy

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