OrderPaperToday– Last Monday, President Muhammadu Buhari signed the Finance bill passed by the National Assembly into law, putting an end to the journey that started in October when he presented the 2020 budget to the joint session of the National Assembly.

This article breaks down the bill for better understanding of its motive.

The bill is an executive bill which sought amendment to the following fiscal instruments; Stamp duty, petroleum income tax, Value added tax, customs and excise duty, capital gain tax, personal income tax and capital gain tax.

While the focus has been on the increment of the value added tax from 5% to 7.5%, there is still a lot in the bill.


The president in his budget presentation speech to a joint session of the National Assembly, admitted that the 2019 budget under-performed, especially in revenue generation, both oil and non-oil.

“This revenue performance is only 58 percent of the 2019 Budget’s target due to the underperformance of both oil and non-oil revenue sources. Specifically, oil revenues were below target by 49 percent as at June 2019. This reflects the lower-than-projected oil production, deductions for cost under-recovery on supply of premium motor spirit (PMS), as well as higher expenditures on pipeline security/maintenance and Frontier exploration,” Buhari stated in his speech.

In the past 6 months, the administration has intensified efforts at increasing revenue by changing existing laws on revenue generation. The Production Sharing Contracts was amended with a projection of increasing revenue from offshore to the tune of $1.4billion and the Finance Bill has also been signed.

In a nutshell, the major focus of the Finance Bill is to increase revenue and create incentives for businesses; with consideration for small businesses.


According to the president, the essence of changes made to the bill is to “Promote 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 our Ease of Doing Business Reforms; and  raising revenues for government.”


CIT is the tax on profits of registered companies in Nigeria. A new amendment to Section 13 covers digital economy.

The new law applies taxes on registered companies: “If it transmits, emits or receives signals, sounds, messages, image or data of any kind by cable, radio, electromagnetic systems or any electronic or wireless apparatus to Nigeria in respect of any activity, including electronic commerce, allocation store, high frequency trading, electronic data storage, online advert, participative network platform, online payment and so on, to the extent that the company has significant present in Nigeria and profit can be attributed to such activity.”

This clause essentially covers social media networks like Facebook, Twitter, Instagram, and also online payment platforms Paypal, Amazon and media platforms like Netflix, Spotify, and E-commerce platforms.

To determine if profit could be attributed to the activity, the law creates a provision that the minister (Finance) will have the power to determine what constitutes economic significance.

The chairman, Senate Committee on Finance, Solomon Adeola, shortly after passing the bill, explained that “By passage of this Act, we have succeeded in putting in place a mechanism where all those e-commerce transaction, Nigeria can start gaining something from it. This is in accordance with global best practices.”

Section 10 of the Act was also amended with a new subsection that mandated banks to request for Tax Identification Number (TIN) before opening bank account for any corporate entity and to request existing banks to provide same.

“Every person engaged in banking in Nigeria shall require all companies to provide their tax identification numbers as precondition for operating a bank account or in case of an account already opened prior to the 30th of September, the bank shall require such tax identification numbers to be provided as a pre-condition for the continued operation of their accounts,” it states.

The old section 40 was repealed as a new one has been created. The new law exempts businesses with turn-over of less than N25 million annually from paying Company Income Tax, while companies with turnover of N100 and above 25 million got CIT tax reduction from 30% to 20%.


Petroleum Tax

The Finance Bill repealed a provision in the Petroleum Income Tax that exempt dividends from Petroleum Profit from taxation. The bill repealed section 60 of the old Act.


Section 4 was amended by changing VAT from 5% to 7.5%.

Section 10 has been renamed non-resident companies to include VAT on their invoice.

The implication is that companies outside the country that want to sell items to Nigerian buyers must include VAT on their invoice. When that is not done, the buyer must calculate the VAT and remit to FIRS.

The provisions read: “A non-resident company shall include the tax on their invoice for supply of taxable services.

“B. The person to whom the services is supplied in Nigeria shall withhold and remit the tax directly to the service in the currency of payment.

“C. Where a person to whom taxable supplies is made in Nigeria is issued an invoice on which no tax is charged, such a person shall self-account for the tax payable and remit the output tax to the service within the timeline prescribed under section 15 of this Act.”

The Value Added tax exempted a lot of consumable goods from taxation. The president in his speech during the budget presentation listed the following items as exempted from taxation.

“a. Brown and white bread; b. Cereals including maize, rice, wheat, millet, barley and sorghum; c. Fish of all kinds; d. Flour and starch meals; e. Fruits, nuts, pulses and vegetables of various kinds; f. Roots such as yam, cocoyam, sweet and Irish potatoes; g. Meat and poultry products including eggs; h. Milk; i. Salt and herbs of various kinds; and j. Natural water and table water.

Exemption from Value added tax also include locally manufactured sanitary towels, tampons and pads.

Furthermore, tuitions in relation to Nursery, Primary and University education are also exempted from valued added tax.



CGT is a tax on profits of sales of non-inventory assets.

Section 36(2) of the CGT act was amended to exempt payment of tax on compensation of loss or damages, unless the compensation is above N10million.

Section 36(2) reads; “sums obtained by way of compensation for loss shall not, however be chargeable gain, except the amount of such compensation or damages exceeds N10,000,000

Indeed the law appears to have much potential in boosting revenue generation for the country but concerns remains about the implementation of the new fiscal laws.


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