A. Update
The President of Nigeria signed the Finance Act 2020 into law on 30 December, 2020. This reaffirms the Federal Government of Nigeria’s commitment to enact fiscal policy annually. Following are the highlights of the salient provisions of the Act:
- 1. Introduction of Significant Economic Presence (SEP) rules to the taxation of certain categories of non-resident individuals, executors or trustees. The Minister of Finance will issue rules to define SEP from a Personal Income Tax Act (PITA) perspective.
- 2. Revision of commencement and cessation rules to prevent double tax. This is to align with the prior amendment to Company Income Tax Act (CITA) in this regard. Tax will be applied on the basis of the individual’s accounting year.
- 3. Introduction of a definition of gross income, which is the basis for calculating consolidated relief allowance. Gross income is defined as income from all sources, excluding non-taxable income, tax-exempt income, income on which no further tax is payable, allowable business expenses and capital allowances.
- 4. Minimum tax is no longer applies to persons who earn National Minimum Wage or less. This category of employment income earners are also exempt from Personal Income tax (PIT) under the Third Schedule to PITA.
- 5. Annual premium paid during the year preceding the year of assessment to an insurance company in respect of insurance on the individuals’ life or the life of his spouse shall be allowed as a deduction
- 6. Employers are mandated to deduct Capital Gains Tax (CGT) on any compensation for loss of office paid to their exiting staff and remit same on or before the 10th day of the following month to the relevant tax authority.
B. Statutory Compliance Release Date: December 30, 2020
C. Effective Date: January 01, 2021
A. Update
The Federal Government of Nigeria (FGN) has gazetted the Finance Act, 2019 (the Act) which was signed into law on 13 January 2020.
As per the amendments proposed in the Finance Bill, which became an Act on Jan. 13, 2020 following provisions are updated:
- 1. Pension contributions no longer require the approval of the state revenue authorities to be tax-deductible.
- 2. Banks will require individuals intending to open bank accounts for the purpose of their personal business operations to provide Tax Identification Numbers (TIN) as a precondition for opening or continuing the operation of such bank accounts.
- 3. Emails are now accepted by the tax authorities as a formal channel of correspondence with taxpayers.
- 4. Child relief (N2,500 per child up to a maximum of 4) and dependent relief (N2,000 per dependent for a maximum of 2) have been deleted.
- 5. The conditions attached to tax exemption on gratuities have been removed. Therefore gratuities are now tax exempt.
- 6. Compensation received for loss of employment of up to ₦10million is exempted from Capital Gains Tax.
