Nigerian Tax Reforms You Should Know In 2021

Small and medium scale businesses in Nigeria occupy a robust position when accessing the nation’s economic growth and development year on year.

And like any other business enterprise, their operations must align with statutory regulations and government mechanisms for smooth functionality. Likewise, the finance Act 2020 among others is key to determining a shift in the modus operandi of Nigerian SMEs. However, it is important for business owners to examine its implications on their business processes.

Thankfully, the Finance Act 2020 has been legally endorsed and it is effective 1st January 2021. Progressively, we cannot overrule the fact that most small business owners would ask- how does the finance bill affect the Nigerian SMEs space?

Below are some of the key changes introduced by the Finance Act 2020 that SMEs business owners should take cognizance of:

• In Nigeria, some areas that have been designated as free trade zones. Companies operating in these zones will enjoy a relief in form of tax exemptions. The Finance Act 2020 states that companies must comply with Returns and Provisional Account Sec 55(1) of CITA which requires them to file self- assessment returns annually.
• Pioneer status can be given to SMEs that are into agricultural production. This entitles them to a Corporate Income tax holiday for an initial period of 4 years extendable for two additional years. This Incentive was established by the Industrial Development (Income Tax Relief) Act, 1971.
• SMEs may not be required to provide audited financial statement as the Federal Inland Revenue service may prescribe other forms of account.
• Companies with no tax payable or sustained loss in a fiscal year will be required to pay minimum tax which has been reduced to (0.25% from 0.5%) of Gross turnover less Franked Investments income. However, small companies that qualify are exempted from minimum tax: they include small companies with an annual turnover of NGN 25 million or less.
• Goods liable to excise duties have been expanded to include telecommunication services provided in Nigeria as may be prescribed in the law or an order issued by the President.
• Companies with no tax payable or sustained loss in a fiscal year will be required to pay minimum tax which has been reduced to (0.25% from 0.5%) of Gross turnover less Franked Investments income. However, small companies that qualify are exempted from minimum tax: they include small companies with annual turnover of NGN 25 million or less.
• VAT should not be applied on Land and Building, commercial airline tickets and hire/lease of agricultural equipment.
• Low-income earners of NGN 30,000 or less are not required to pay Personal Income Tax.
• Electronic means have been approved as a viable means of serving notice of assessment and objections under CITA.
• Stamp duty will no longer be charged on Electronic bank transfers, instead a sum known as electronic money transfer levy of NGN 50 will be charged on deposits of NGN 10,000 or more to any bank accounts.

In essence, regulatory framework and statutory policies to an appreciable extent, contribute to the success, sustainability, and growth of business enterprises in Nigeria and, business owners must adhere in order to survive.

It is therefore clever for business owners to always align from time to time.