President Muhammadu Buhari signed the Finance Act 2020 into law, introducing over 80 changes to 14 different existing laws that will affect stakeholders.
Before we get into the details of the Act, what is the Act all about?
The Finance Act serves as a melting pot of all the other tax laws in the country. It is that container into which all other tax laws are enclosed.
The benefit of this Act is to boost the revenue of the Federal Government and reduces tax evasions.
Below are 10 of the things included in the Finance Act 2020:
- People who earn N30,000 or less per month are exempted from paying a personal income tax.
- Any dividend in a listed company and all dormant account balances that remain unclaimed for more than 6 years will be relocated to an Unclaimed Funds Trust Fund that will be overseen by the Debt Management Office (DMO).
- Telecommunication services provided within the shores of Nigeria have been included in excise duties as prescribed by the law or an order from the president.
- There has been a reduction in import duties for certain vehicles: Tractors, from 35 percent to 15 percent; Mass Transit Vehicles for more than 10 persons and trucks, from 35 percent to 10 percent; and import levy on cars reduced from 30 percent to 5 percent.
- Commercial airline tickets have been exempted from VAT.
- Land and building are exempted from VAT and are not considered taxable. What this means is that there will no VAT imposed on land transferred or the purchase of a building. There is also no VAT on rented property.
- The Federal Internal Revenue Services (FIRS) could prescribe the form of accounts for small and medium companies other than audited financial statements as provided by the Companies Income Tax Act (CITA).
- Donations made to any fund structure created by the government towards a natural disaster or a pandemic will be tax-deductible and will be subject to a maximum of 10 percent assessable profit after other allowable donations.
- Pioneer status could be granted to any small or medium company engaged in primary agricultural production for an initial 4-year period and an extra two years, bringing it to a total of 6 years.
- For companies trading within the free trade zones, an exemption from taxes will be subject to compliance with tax filing and returns to the FIRS as provided by CITA.