As the global economy appears to have entered a subdued recovery, policymakers now face formidable challenges — in public health, debt management, budget policies, central banking and other structural reforms.

To overcome the impacts of the globally threatening COVID-19 pandemic and counter the investment headwind, there is need for a major push to improve business environments, increase labour and product market flexibility, and strengthen transparency and governance.

Considering financial fragilities in Nigeria, just as in many other countries, as a result of the pandemic and as the growth shock impacts vulnerable household and business balance sheets, it is obviously timeous to take cognizance of key changes in the Finance Act 2020 in the light of the formidable challenges.

The federal government is on guard as it tries to ensure that the fragile recovery gains traction and sets a foundation for robust growth.

While it is no more news that the Finance Bill 2020 has been signed into law, the new law has introduced over 80 amendments to 14 different laws and has already taken effect from 1st January this year. It is to be noted that compensation for loss of office up to N10 million exempted from capital gains tax. Tax due on excess above N10 million is to be deducted by the payer and remitted within the time specified under the pay as you earn (PAYE) regulations.

The Minister of Finance, Budget and National Planning may, going forward, effect a direct deduction from treasury single account (TSA) or other accounts of a corporation to enforce compliance. Also, it is prohibited to reduce contract values or splitting of procurement to evade the use of the appropriate procurement method, just as the balance of operating surplus of a corporation shall be paid to the Consolidated Revenue Fund (CRF) of the Federation on a quarterly basis.

Minimum tax for companies in respect of returns for years of assessments due between 1st January 2020 and 31st December 2021 has been reduced from 0.5 percent to 0.25 percent of gross turnover less franked investment income. The cost of donation made in cash or kind to any fund set up by government in respect of any pandemic or natural disaster to be tax deductible subject to a maximum of 10 percent of assessable profit after other allowable donations.

It is in place that the Federal Inland Revenue Service (FIRS) may prescribe the form of accounts other than audited financial statements for small and medium companies as defined under Companies Income Tax Act (CITA). Considerably, service of notice of assessment and objections under CITA may be done via courier service, email or other electronic means as may be directed by FIRS in a notice. Tax Appeal Tribunal (TAT) may conduct its hearing remotely via virtual means, using such technology or application as may be necessary to ensure fair hearing.

Accordingly, public character for the purpose of tax exemption requires an organisation or institution to be registered in accordance with relevant laws in Nigeria and does not distribute or share its profits in any manner to members or promoters. A small or medium company engaged in primary agricultural production may be granted pioneer status for an initial period of four years and an additional two years, making a total of six years.

In fact, gross income for personal relief purposes has been redefined as income from all sources less non-taxable income, exempt items and income on which no further tax is payable. In the case of an enterprise, less all allowable business expenses and capital allowance. There is exemption of low-income earners earning minimum wage or less from personal income tax.

Goods liable to excise duties have been expanded to include telecommunication services provided in Nigeria as may be prescribed in the law or an Order issued by the President of Nigeria. Reduction of import duty on tractors from 35 percent to five percent; mass transit vehicles for transport of more than 10 persons and trucks from 35 percent to 10 percent, and reduction of import levy on cars from 30 percent to five percent.

Taxable supply with respect to goods has been defined to include where the beneficial owner of the right in or over goods is a taxable person in Nigeria or the goods or right is situated, registered or exercisable in Nigeria. Services include those consumed by a person in Nigeria whether rendered within or outside Nigeria excluding employment; and in respect of incorporeal, includes exploitation of a right, acquisition of or assignment of rights by a person in Nigeria and incorporeal connected with tangible or immovable asset located in Nigeria. Goods exclude land and building, money or securities.

There is an exemption of commercial airline ticket from value added tax (VAT), and hire or lease of agricultural equipment for agricultural purposes.

A non-resident person that makes a taxable supply to Nigeria is required to register for tax and obtain a tax identification number (TIN), include VAT on its invoice, and may appoint a representative in Nigeria for the purpose of its tax obligations. The FIRS may issue guidelines on this purpose.

Now, there is to be deletion of electronic bank transfer as transaction liable to stamp duty and introduction of electronic money transfer levy of N50 on electronic transfer of money deposited in any bank or financial institution on any account on sums of N10, 000 or more. Revenue is to be shared based on derivation thus:15 percent to the federal government and Federal Capital Territory (FCT) and 85 percent to States. Meanwhile, Accountant General of the Federation is to open dedicated accounts for each tax type for the payment of tax refunds to be administered by the FIRS and funded based on annual budgets for tax refund for each tax-type as may be approved by the National Assembly.

Unclaimed dividends in a listed company and unutilised amounts in a dormant bank account outstanding for six years or more to be transferred to the Unclaimed Funds Trust Fund as a special debt to the federal government to be managed by the Debt Management Office (DMO) and shall be available to the shareholder or account holder at any time together with the yield thereon.

For companies operating in the free trade zones, exemption from taxes is subject to compliance with tax filing and returns obligation to the FIRS under section 55(1) of CITA. Nigerians now look to the establishment of a Crisis Intervention Fund of N500 billion or other sums as may be approved by the National Assembly; and by way of trust, as a sub-fund of the Crisis Intervention Fund, an Unclaimed Funds Trust Fund.

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