Some items exempted from the increased Value Added Tax (VAT)
by the Finance Act 2019, have been listed by the presidency.
According to Vice President Yemi Osinbajo's media aide Laolu
Akande, some of the items include locally produced sanitary pads, food
additives and table water.
The full statement reads;
In a bid to ensure that the cost of living does not rise for
Nigerians because of the changes in the Value-Added Tax, several basic food
items, locally manufactured sanitary towels, pads and tuition relating to
nursery, primary, secondary and tertiary education have been added to the
exemption list of goods and services on the VAT under the Finance Bill 2019,
signed by President Muhammadu Buhari last week, on the 13th January 2020.
Amongst other benefits, the law will consolidate efforts
already made in creating the enabling environment for improved private sector
participation and contribution to the economy as well as boost states’
revenues.
According to the President, “the Finance Bill will support
the funding and implementation of the 2020 Budget. We shall sustain this
tradition by ensuring that subsequent budgets are also accompanied by a Finance
Bill.”
Below are the details:
The Finance Bill, 2019 was submitted to the National Assembly
by President Muhammadu Buhari alongside the 2020 Appropriation Bill, and signed
into law by the President on January 13, 2020.
The Bill, now an Act, has the following objectives:
Promoting fiscal equity by mitigating instances of
regressive taxation;
Reforming domestic tax laws to align with global best
practices;
Introducing tax incentives for investments in infrastructure
and capital markets; Supporting Micro, Small and Medium-sized businesses in
line with the administration’s Ease of Doing Business Reforms;
Raising Revenues for Federal, State and Local Governments.
FACTSHEET ON NEW FINANCE ACT 2019
The new Act is the first legislation created to accompany an
Appropriation Act since the return of democracy in 1999.
The new Act raises VAT from 5% to 7.5%.
To allay fears that low-income persons and companies will be
marginalized by the new law, reduce the burden of taxation on vulnerable
segments, and promote equitable taxation, the Finance Act 2019 has extended the
list of goods and services exempted from VAT. The additional exemptions include
the following:
Basic food items – Additives (honey), bread, cereals,
cooking oils, culinary herbs, fish, flour and starch, fruits (fresh or dried),
live or raw meat and poultry, milk, nuts, pulses, roots, salt, vegetables,
water (natural water and table water)
Locally manufactured sanitary towels, pads or tampons.
Services rendered by microfinance banks
Tuition relating to nursery, primary, secondary and tertiary
education.
Nigeria’s increased new VAT rate of 7.5% is still the lowest
in Africa, and one of the lowest anywhere in the world. (South Africa VAT: 15%;
Ghana: 12.5%; Kenya: 16%; Egypt: 14%; Rwanda: 18%; Senegal: 18%)
Under Nigeria’s revenue sharing formula, 85% of collected
VAT goes to States and Local Governments. This means that the bulk of
additional VAT revenues accruing from the increase will go towards enabling
States and Local Governments meet their obligations to citizens, including the
new minimum wage as already noted by State Governors. Before now, the Buhari
administration had firmly resisted previous suggestions to raise VAT.
The new Finance Act exempts Businesses with turnover below
25 million from VAT payments.
Companies Income Tax (CIT)
Under the new law small companies – companies with less than
N25 million in annual turnover are charged Zero CIT.
CIT for Companies with revenues between N25 and N100m
(described in the Act as “medium-sized” companies) has been reduced from 30% to
20%
Large companies – with annual turnover greater than N100m –
will continue to pay the standard 30% CIT
The new Act includes a provision that grants to all
companies “engaged in agricultural production” in Nigeria “an initial tax-free
period of five years”, renewable for an additional three years
The new Act also provides incentives to promote tax
compliance through bonus reductions in CIT for early remittance:
2% bonus for medium-size companies
1% bonus for other companies.
Personal Income Tax Act
The new Act now includes “electronic mail” as an acceptable
form of correspondence for persons disputing assessments by the Tax
Authorities.
Contributions to Pension and Retirement Funds, Societies and
Schemes are now unconditionally tax-deductible.
Stamp Duty Act
With the new Act, the N50 Stamp duty charge is now
applicable only to transactions amounting to N10,000 and above, a significant
increase on the former threshold of N1,000.
The new Act also expands the list of items exempted from
stamp duty.
Customs and Excise Tariff
To reduce unfair advantages previously conferred on imported
goods at the expense of locally manufactured ones, certain imported goods are
now subject to excise duties similar to locally manufactured goods
