Published by The Tax Club, University of Lagos. on

On Thursday, 21 November 2019, the Senate passed the Finance Bill, 2019. The Bill seeks to amend seven (7) existing tax and fiscal policy laws (Companies Income Tax Act, 2004; Value Added Tax Act, 2007; Customs and Excise Tariff (Consolidation) Act, 2004; Personal Income Tax Act, 2007; Capital Gains Tax Act, 2007; Stamp Duties Act, 2007; and Petroleum Profit Tax Act, 2004) to reform Nigeria’s tax system for enhanced implementation and effectiveness.

The Bill was presented by the Presidency and is to amend “tax provisions, make them more responsive to the tax reform policies of the Federal Government and enhance its implementation and effectiveness”. Moral lesson – the Government will be upgrading a whole lot of tax laws[1].

The Finance bill was presented by the President, Muhammadu Buhari on October 8,2019 alongside 2020 Federal Government Budget to the National Assembly. According to the President, the Bill seeks to achieve five 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 Ease Of Doing Business Reforms, and
  • Raising revenues for government.[2]


  1. The Value Added Tax:
  • The Finance Bill has helped to shed more light in definition of terms in the Act.[3] For instance, there has been difficulty explaining the term ‘basic food item’ contained in section 46 of the Act. It has been interpreted to mean agro and aqua based staple food described as additives, cereals, cooking oils, culinary herbs, fish of all kinds, flour and starch, fruits, live or raw meat and poultry, milk, nuts, pulses, roots, salt for culinary use among others.

Expansion of VAT exemption list

  • The scope of taxable goods has been expanded to raise more revenue. Section 2 of the Value Added Tax Act, 2004 has been re-enacted to mean supply of goods and services in Nigeria other than those listed in the First Schedule of the Act. Goods and Services duly interpreted to mean goods physically present in Nigeria or the beneficial owner of the rights in or over the goods is a taxable person in Nigeria and the goods situated in Nigeria; and services rendered in Nigeria by a person physically present in Nigeria at the time if the service or the services are provided to a person in Nigeria regardless of whether the services are rendered within or outside Nigeria respectively. A new item has been added to the VAT exempt list, locally manufactured sanitary towels, pads or tampons; First Schedule of the Act.

Section 4 – Rate of VAT: Increase in VAT rate from 5% to 7.5%.

  • With its 5% current VAT rate, the lowest in the world, the Finance Bill introduces an increase to 7.5%; section 4 of the VAT Act. VAT is an indirect form of tax which is relatively easier to collect compared to other direct income taxes. Also, it is a good source of generating revenue for the government because of its potential to capture a large number of persons and also its intention to bring the county’s VAT rate in line with other comparable economy.
  • Section 8 of the Act, which provides that if the business was already existing before the introduction of the Act, then it must be registered within six months after the introduction of the Act and where the business is not existing before the introduction of the Act, the business must within six months after its commencement be registered with the tax authority. Failure of which will amount to payment of; #10 000 for the first month in which the failure occurs and #5 000 for each subsequent month in which the failure continues. Section 37 of the Finance Bill provides that where there’s a failure to register under subsection 1, such taxable person shall be liable to; #50 000 for the first month in which the failure occurs and #25 000 for each subsequent month in which the failure continues.
  • Section 32(3) of the Finance Bill states that in the event of that a taxable person ceases permanently to carry out business in Nigeria, such person must give notice to the Service I.e. tax authority within 90 days of such cessation to de-register for tax purpose.
  • Section 10 of the VAT Act, non-resident companies must register with tax authority using the address of person it is in subsisting contract with in Nigeria; and shall include the tax in its invoice for the supply of taxable services and person to whom the the goods/service is supplied must withhold and remit the tax to tax authority in the currency of payment.
  • Section 15 of the Act has been amended to read, where a taxable person has made taxable supplies or expects to make taxable supplies which in value is #25 000 000 or more, they are to file VAT returns.
  • In order to harmonise penalties for noncompliance, section 19 has been amended. Where a taxable person does not remit the tax within the time specified (on or before the 21st day of every month) a sum equal to 10% of the unremitted tax and interest at the prevailing Central Bank of Nigeria minimum re-discount rate plus a spread to be determined by the minister shall be added to the tax not remitted and provision of the Act relating to collection and recovery of unremitted tax shall apply.


  1. Company Income Tax Act[4] (CIT Act)
  • From the provision of section 2 of the Finance Bill, companies must provide Tax Identification Number as a precondition for opening a bank account and, where an account is already opened, prior to 30 September 2019, the bank shall require the Tax Identification Number to be provided as a precondition for continued operation of their bank account. This is to ‘synchronise taxpayer banking and tax databases with a view to improving tax compliance and ease of tax administration. Also to help expand the Tax Net in Nigeria so far as active corporate entities are concerned’.[5]
  • In order to ensure that companies are not taxed twice on the same income stream, section 9 now reads “tax for each year of assessment will be payable at the relevant rates upon the profits on company accruing it, derived from, brought into or received in, Nigeria ‘that are not subject to tax under the Capital Gains Tax Act, Petroleum Profits Tax Act, Personal Income Tax Act’[6]
  • To ensure that insurance companies are taxed in a fair, equitable manner, relative to other companies operating in other sectors of the economy, modifications have been made to section 16 to remove double tax provisions and recognise regulatory costs that will be invited by such companies in compliance with the conditions imposed by the insurance regulator.[7]
  • Section 3 of the Finance Bill provides that a new paragraph be inserted into subsection 2 of section 13 of CIT Act to the effect that a non-resident company is now taxable in Nigeria to the extent that it has a “significant economic presence “and its profit can be attributable to such activity; transmits, emits or receives signals, sounds, messages, images, or data of any kind by cable, radio, electromagnetic systems… to Nigeria inter alia.
  • By Section 19 of CIT Act, any dividend declared and paid by a company in excess of the total taxable profit declared in any accounting year is subject to EDT regardless of the source or nature of the dividend paid.
  • Definitions have been made clearer and new terms introduced by section 23 of the Finance Bill. Minimum tax to be levied and paid is 0.5% of the turnover of the company. Small companies are exempted from minimum tax; section 33 CIT Act. Sections 41,43 is repealed and section 40 is replaced with a new provision that eliminates redundant provisions.


  1. Personal Income Tax Act[8] (PIT Act)
  • The words Federal Board of Inland Revenue has been replaced with the Federal Inland Revenue Service where necessary. Persons intending to open a bank account for business operations must provide a tax identification number as a precondition for such opening or continued use of a bank account; section 49 PIT Act. The definition of the word ‘Board’ is to be deleted and ‘Service’ is defined as Federal Inland Revenue Service as defined in the Federal Inland Revenue Service (Establishment) Act, 2007.
  • Section 33 of Personal Income Tax Act: Deletion of tax relief for children and dependent relatives
  1. Stamp Duties
  • Stamp, Stamped and Instrument will be redefined to accommodate electronic means. ‘Stamp’ is now extended to include an “electronic stamp or an electronic acknowledgement for denoting any duty or fee”. An instrument is also ‘stamped’ when it is digitally tagged with electronic stamp or notional stamp on an electronic receipt. The Instrument includes every written document, including electronic receipt. [9]

The Finance Bill will come into effect on January 2nd, 2020 and according to the Minister of Finance, Budget and National Planning, it will be reviewed annually as the Federal Government plans to grow the ratio of revenue to Gross Domestic Product from six percent to fifteen percent by 2023.

The Finance Bill is seen as a welcome innovation in the tax world in Nigeria as several tax legislations require amendment. The bill seeks to promote fiscal equity by reducing instances of tax regression, improving domestic tax practice in line with global practices. The initiative is laudable as the proposed modifications to the fiscal rules around taxation are clearly aimed at creating an enabling business environment and encourage growth and investment by that sector of the economy.



[2]Finance Bill 2019

[3] Value Added Tax Act LFN 2004

[4] Company Income Tax Act LFN 2004


[6] Templars Legislative Watch: Finance Bill, 2019: SB.140

[7] Finance Bill 2019

[8] Personal Income Tax (Amendment) Act 2011


Compiled by Mujeedah Alliyu , a 400 level student of faculty of law who has a budding interest in insurance and taxation. She also loves photography and art.

400 level student of faculty of law university of lagos

Mujeedah Alliyu

LinkedIn: Mujeedah .A. Alliyu
Twitter: MujeedahA

Categories: National Tax

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