The Finance Act 2020 has come into effect, having been signed into law on December 31.
The act introduces over 80 changes to a range of laws, including the Companies Income Tax Act, Personal Income Tax Act, Nigerian Export Processing Zone Act, Customs and Excise Tariff, and the Capital Gains Tax Act, among others.
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These adjustments revise previously existing tax regimes. Thus they have a bearing on both employers and employees in Nigeria’s commercial space.
Here are some of the changes introduced by the Finance Act 2020.
Low Income Earners Won’t Pay Personal Income Tax
Persons who earn ₦30,000 or less per month are now exempted from Personal Income Tax. Companies that have previously deducted PAYE from the salaries of such workers are required to stop doing so. It also protects low-income workers from any possible exploitation from tax officers related to the payment of Personal Income Tax.
New Exemptions from VAT
Value Added Tax will not be charged on the purchase of houses or transfer of land. It will also not be added to rent on residential or commercial property.
Commercial flight tickets have been exempted from VAT as well. This should force down the cost of flying, and encourage more air travel.
Reduction of Minimum Tax Payable
Minimum Tax Payable by companies has been reduced from 0.5% to 0.25% of ‘gross turnover less franked investment income’ (tax-free income usually distributed as dividends).
Minimum Tax Payable refers to a situation in which a company has no tax to pay, such as when it has recorded a loss.
Dormant Account Balances Will be Borrowed by Government
Dividends from companies listed on the NSE that have been unclaimed for six years, and bank account balances that have been dormant for a similar length of time, will be transferred to the Federal Government’s Unclaimed Funds Trust Fund.
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The Unclaimed Funds Trust Fund will be managed by the Debt Management Office (DMO). However, dividend and bank account owners can request for their funds, along with the interest that accrues, at any time.
Telecom Services are Liable to Excise Duty
Telecommunications services are now liable to Excise Duty, subject to a law or order issued by the President. This means that consumers may soon have to pay more for telecom services, including airtime and data.
Introduction of Electronic Money Transfer (EMT) Levy
Customers will no longer pay stamp duty on bank transfers. But they will have to pay a new fee, called the Electronic Money Transfer (EMT) levy on bank transfers for amounts of about ₦10,000 or more. Each transfer will incur a ₦50 charge.
Revenues from the EMT will be shared between the Federal Government and FCT (15%) and states (85%).
FIRS May Not Request Audited Accounts from Small Businesses
The Federal Inland Revenue Service (FIRS) could assess small businesses based on account forms besides audited accounts. As a result, small businesses may no longer be required to submit audited accounts to them.
Tax Holiday for Agricultural SMEs
The government will grant pioneer status to SMEs involved in agriculture for at least four years, extendable to a further two years.
Pioneer Status effectively grants these businesses a tax holiday, so they don’t have to pay Company Income Tax.
Tax Filing for Companies in Free Trade Zones
Companies operating in Free Trade Zones are expected to meet tax filing and returns obligations with the FIRS if they are to be exempted from taxes.
Featured Image Source: BusinessDay NG
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