Finance Act 2019 at a Glance

The Finance Act 2019 introduces several changes to Nigerian tax laws. Some key changes introduced by the Finance Act are identified below:

• Tax rates

Small companies (gross annual turnover less than N25million) are exempt from Companies Income Tax; Medium companies (gross annual turnover of more than N25million but less than N100 million) to be taxed at 20%;
Minimum tax shall be 0.5% of gross turnover less franked investment income

VAT rate shall be 7.5%;
Companies which make VATable supplies of less than N25million annually are exempt from charging VAT and filing VAT Returns.

• Banking requirements

Banks and other financial institutions required to obtain TINs from customers before opening new ac counts for business purposes and for continued operation of existing business accounts;
Electronic transfers of N10,000 and above are liable to stamp duty of N50.

• Allowable deductions and non-allowable items under CITA

Interest on loans by foreign connected person is allowable provided it does not exceed 30% of earnings before interest, taxes, depreciation, and amortization in the first six (6) years;
Dividends and mandatory distributions by REITs are an allowable deduction provided they are approved by SEC;

Managerial and technical fees must comply with Transfer Pricing Regulations failing which they will not constitute an allowable deduction. Ministerial approvals (e.g. NOTAP approvals) are no longer a basis for determining allowable deduction;

Penalties prescribed in any Act of the National Assembly are not allowable deductions;
Tax or penalties borne by a company on behalf of another company are not allowable deductions.

• Incentives

Companies in agricultural production are entitled to income tax holiday of 5 (five) years (renewable for an additional 3 years);
The following additional items are now exempt from VAT:

• Locally manufactured sanitary towels, pads and tampons;
• Services by MFBs, people’s banks and mortgage institutions;
• Tuition in nursery, primary, secondary and tertiary institutions.