The 2021 finance bill on Wednesday passed second reading in the Senate.

This followed a presentation of the main debate by the Leader of the Senate, Mr. Yahaya Abdullahi in plenary session.

The bill was entitled: “A bill amending the applicable laws on taxes, excise and duties in accordance with the reforms of the macroeconomic policy of the federal government to modify and add new provisions to specific laws relating to the management of public finances of the Federation and for other related matters with that 2021 ”.

According to an analysis by Taiwo Oyedele, Fiscal Policy Partner and Africa Tax Leader at PwC, the bill aims to amend 12 different laws, namely:

  1. Capital Gains Tax Act (LTGC)
  2. Corporate Income Tax Act (ITA)
  3. Federal Tax Service (Establishment) Act [FIRSEA]
  4. Personal Income Tax Act (PITA)
  5. Stamp Duty Act (SDA)
  6. Higher Education Trust Fund (Institution) Act [TETFEA]
  7. Value Added Tax (VAT) Law
  8. Insurance Act
  9. Nigerian Police Trust Fund Act (Establishment) [NPTFEA]
  10. Law on the National Agency for Scientific and Technical Infrastructures (NASENI Law)
  11. Finance law (control and management) [FCMA], and
  12. Fiscal Responsibility Act (FRA)

Here are the highlights of the main changes proposed:

1. Capital gains tax at the rate of 5% applicable to the disposal of shares of a Nigerian company valued at 500 million naira or more during 12 consecutive months, except when the proceeds are reinvested in shares of a Nigerian company in the same tax year. Partial reinvestment will attract tax proportionately. The transfer of shares within the framework of the regulated securities lending transaction is exempt.

2. Lottery and gaming activities must be specifically taxable under the CITA, including betting, games of chance, promotional competitions, gambling, betting, video poker, roulette, craps, bingo, slot machines or games and the like.

3. Companies engaged in petroleum operations, including intermediate and downstream operations, will not be eligible for the profit exemption in respect of goods exported from Nigeria. Downstream companies were previously eligible under the old Upstream and Downstream classification.

4. The FIRS shall be empowered to assess the CIT on the turnover of a foreign digital enterprise involved in the transmission, emission or reception of signals, sounds, messages, images or data of any kind, including the e-commerce, app stores and online advertisements.

5. The capital allowance payable on an asset is limited to the part used to generate taxable profits. Assets partially used to generate taxable income will be eligible for the pro rata capital allowance except when the share of non-taxable income does not exceed 20% of the company’s total income.

6. Any capital deduction or unabsorbed deductions carried forward by a small or medium-sized business, other than a pioneer business, to be considered as having been claimed and consumed during each of these taxation years.

7. The reduction of the minimum tax rate from 0.5% to 0.25% of turnover (less franked investment income) must be applicable to two accounting periods between January 1, 2019 and December 31, 2021. , at the choice of the taxpayer.

8. The contested tax must be suspended until determined, while the uncontested tax must be paid within 30 days of service of the tax notice on the company, unless extended by FIRS. The reference to the provisional tax has been removed in recognition of the well-established self-assessment tax regime.

9. Withholding tax on interest received from a mutual fund to be treated as final tax. Only the WHT on dividends is currently treated as a final tax for local companies.

10. Deployment of technology to automate tax administration, including assessment and information gathering by FIRS to now include third party technology (previously only proprietary technology could be deployed). A penalty of 50,000 N is applicable when a company does not grant access to FIRS in more than 25,000 N for each day that the failure continues.

11. FIRS will be the principal agency of the federal government responsible for the administration, assessment, collection, accounting and enforcement of taxes owed to the Federation, the federal government and the one of its bodies, unless otherwise authorized by the Minister of Finance.

12. Any individual or agency of the federal government must refer matters requiring tax investigation, enforcement and compliance to FIRS. Relevant officers who break the rule face a sentence of N 10 million and / or 5 years’ imprisonment on conviction.

13. Life insurance premium deductible for personal income tax purposes to exclude a deferred annuity contract.

14. The Minister of Finance, subject to the approval of the National Assembly, sets the regulations for the imposition, administration, collection, remittance, including the distribution of arrears of stamp duty and levies. of electronic money transfers received between fiscal years 2015 and 2019.

15. Higher education tax must be paid within 30 days of service of the assessment (currently 60 days).

16. Non-residents making taxable supplies to recipients in Nigeria have the primary obligation to invoice, collect and remit VAT to FIRS. Nigerian beneficiaries’ VAT withholding obligation is now limited to cases where the non-resident or his designated agent does not collect VAT.

17. The exemption from VAT registration and the compliance requirement applicable to small businesses with an annual turnover of less than N25 million to exclude businesses engaged in upstream petroleum operations, regardless of or their turnover.

18. Appointment of FIRS to assess, collect and enforce the payment of the Nigerian Police Trust Fund Fee. The law enacted in 2019 imposed a tax of 0.005% on the net profit of companies operating in Nigeria.

19. Amendment of the Law on Infrastructure of the National Science and Engineering Agency in order to remove the obligation for commercial enterprises to pay to the Fund an annual tax of 0.25% of turnover. The main sources of funds will be limited to 1% of the Federation account.

20. Compulsory payment of gross revenue collected by federal departments, departments or agencies into the account of the federation or into the consolidated revenue fund, as the case may be, unless otherwise authorized by law. Any officer who violates this requirement may be liable, on conviction, to imprisonment for up to 5 years or a fine of 5 million Naira or both.

21. Amendment of the Fiscal Responsibility Law to allow the government to borrow for “critical reforms with significant national impact”. Currently, governments at all levels are empowered to borrow only for capital expenditure and human development. Capital expenditure is defined as the expenditure on an asset that lasts more than one fiscal year. Human development and critical reforms are not defined.