Finance Act, 2020: Tax Implications for Foreign Companies and Individuals Doing Business In Nigeria

Introduction

The Finance Act 2020 came into force on 1st January 2021. A major objective of the Finance Act 2020 is to generate increased revenue, provide tax incentives to stimulate economic growth, streamline existing tax incentive regimes, and to clarify ambiguities in various laws. The Finance Act 2020 (coming on the heels of the Finance Act 2019) is the second of such statutes in two consecutive years to be enacted by the Buhari administration. These statutes allow the Federal Government to undertake targeted amendments of several laws at the same time to achieve its fiscal objectives instead of having to amend each law separately.

The scope of the Finance Act 2020 is very wide. However, we will examine only some of the provisions that affect foreign companies and individuals doing business in Nigeria:

Tax returns:

  • the company's full audited financial statements and the financial statement of the company’s Nigerian operations, attested by an independent qualified or certified accountant in Nigeria;
  • tax computation schedules based on the profits attributable to the company’s Nigerian operations;
  • a true and correct statement, in writing, containing the amount of profits from each and every source in Nigeria; and
  • duly completed Companies Income Tax Self-Assessment forms.

Significant economic presence is now the basis for taxing non-resident individuals who provide technical, management, consultancy or professional services in Nigeria:

The Finance Act 2020 amends Section 55 of the Companies Income Tax Act (CITA) by creating a special procedure and requirement for foreign companies that derive profit or are otherwise taxable in Nigeria to file tax returns with the Nigerian tax authorities. This is unlike the previous regime which imposed a one-size-fits-all filing procedure for both foreign and Nigerian companies. Now, foreign companies are required to file their tax returns in Nigeria by submitting the following:

However, where Withholding Tax (WHT) is the final tax in respect of all the transactions entered into by a foreign company, the company will not have any obligation to file any companies income tax return in Nigeria in respect of that year.

The Finance Act 2020 introduces a Section 6A into the Personal Income Tax Act (PITA) which provides that where a non-resident individual receives gains or profits as a result of carrying on a

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