Site icon Ships & Ports

VAT now 7.5% as Buhari signs 2019 Finance Bill into law

Buhari signs anti-monopoly law
Muhammadu Buhari

 

President Muhammadu Buhari on Monday signed the 2019 Finance Bill, which increased the rate of Value Added Tax (VAT) from the present 5% to 7.5%, into law. 

The bill was submitted to the National Assembly alongside the 2020 budget, which was signed into law on December 17, 2019. 

“I am pleased to announce that this morning I signed into law the Finance Bill, 2019. We introduced the bill alongside the 2020 budget, to reform Nigeria’s tax laws to align with global best practices, support MSMEs in line with our Ease of Doing Business Reforms, incentivize investments in infrastructure and capital markets and raise government revenues,” Buhari tweeted on Monday. 

The new Finance Law amends the Petroleum Profit Tax Act, Customs and Excise Tariff Act, Company Income Tax Act, Personal Income Tax Act, Value Added Tax, Stamp Duties Act and Capital Gains Tax.

The bill also made provisions for companies with an annual turnover of less than N25 million to be exempted from paying company income tax and raised the threshold from which stamp duty will be charged for online transactions from the current N1,000 to N10,000.

The key highlights of the new tax law are that banks will request for Tax Identification Number (TIN) before individuals are allowed to open bank accounts while existing account holders must provide their TIN to be able to operate their accounts.

By the new law, non-residents who provide imported technical and management services in Nigeria will be taxable at a final withholding tax rate of 10%; while dividends distributed from petroleum profits will attract 10% withholding tax.

Those that will be affected by the law will be those with investments in oil and gas.

A minimum tax provision of 0.5% of turnover will apply to companies without profit and are unable to pay Company Income Tax (CIT) and exemption will only apply to small companies that record less than ₦25 million turnover.

Non-resident companies will now pay minimum tax. Specifically, small businesses with turnover less than ₦25 million will be totally exempted from Companies Income Tax (CIT) and entities with less than ₦25 million in turnover are exempted from VAT registration.

Going forward, CIT rate of 20% now applies to medium-sized companies with turnover between ₦25 million and ₦100 million. This is to boost Small and Medium Enterprises (SMEs). 

The law also allow the use of emails as a communication medium with tax institutions particularly the Federal Inland Revenue Service (FIRS) and state revenue agencies.

Early payment of Company Income Tax has been incentivised with the deduction of 2% of tax payable by medium-sized companies and 1% for large companies.

Henceforth, stamp duty on bank transfers will apply to amounts from ₦10,000 and above.

Transfers between the same owner’s accounts in the same bank, including electronic bank transfers, will be exempted.

Speaking on the new law, the Lagos Chamber of Commerce and Industry (LCCI) commended the Federal Government on some of its expected positive impacts.

LCCI Director-General, Muda Yusuf, in a statement made available to newsmen day in Lagos on Monday, said that a number of favourable provisions for small businesses were reflected in the law.

He said that the impact on government revenue would be positive, especially for states and local governments, as their fiscal position would be enhanced.

He, however, expressed concern on the impact the value added tax (VAT) increment would have on businesses and end users from the cost pressure perspective, due to the high cost in operating environment.

Yusuf also expressed concern over the provision on minimum tax, saying that it was inappropriate to compel loss-making firms to pay tax, no matter how little. This, the Director-General explained, amounted to erosion of capital for such businesses.

“The finance bill has a number of favourable provisions for small businesses and this is an aspect to commend.

“However, the VAT increment would impact adversely on businesses from cost pressures perspective.

“Margins would be affected, depending on the extent to which additional costs could be passed to consumers.

“We worry that we are operating in a high cost environment and also have the worry about the provision on minimum tax which we had argued against this provision.

“It is inappropriate to compel loss-making firms to pay tax, no matter how little. This amounts to erosion of capital,” he said.



Copyright Ships & Ports Ltd. Permission to use quotations from this article is granted subject to appropriate credit given to www.shipsandports.com.ng as the source.

Exit mobile version