KEY DEVELOPMENTS IN THE FINANCE ACT 2021

• INTRODUCTION

The Federal Government of Nigeria led by President Muhammadu Buhari has taken several measures to resuscitate the Nigerian economy. One of those measures is the enactment of the Finance Act 2021 (“the Act”), which came into force on January 1^st, 2022. The Act has some important provisions that directly reform existing tax legislations and deploy strategies to improve the financial management of the government.

Notably, the Act amended the Capital Gains Tax Act, Companies Income Tax Act, Customs, Excise Tariffs, Etc. (Consolidation) Act, Personal Income Tax Act, Stamp Duties Act, Tertiary Education Trust Fund (Establishment, Etc.) Act, Value Added Tax Act, Insurance Act, Nigerian Police Trust Fund (Establishment) Act, National Agency for Science and Engineering Infrastructure Act, Finance (Control and Management) Act, Fiscal Responsibility Act and Federal Inland Revenue Service (Establishment) Act.

• Some Notable Provisions

(a) Capital gains tax is now payable at the rate of 10% (ten percent) on all gains that accrue from the disposal of shares worth ₦100,000,000 (one hundred million Naira) or above in any twelve (12) consecutive months except where the proceeds from such disposal are utilized or reinvested in the shares of the same company or any other Nigerian company within the same year of assessment.

(b) Excise duty is now payable on non-alcoholic, carbonated, and sweetened beverages at the rate of ₦10 per liter. This taxation of sugary drinks is suggested by the World Health Organization (WHO) as a way to reduce the consumption of sugar.

(c) Federal Inland Revenue Service (“FIRS”) is empowered to use technology and automate tax administration in Nigeria including tax assessment and information gathering provided that it gives 30 days’ notice to the taxpayer.

(d) Companies engaged in upstream, midstream, and downstream Petroleum operations are excluded from tax incentives in respect of goods exported from Nigeria.

(e) The Finance Act 2021, has amended the FIRS Establishment of 2007 to impose an obligation on employees of FIRS and all those engaged by the body to carry out its responsibilities to regard taxpayer information with the utmost confidentiality. The Act has expanded tax data protection obligations placed on FIRS officials by ensuring that the information of data subjects is kept secret and confidential.

(f) There is an increase in Tertiary Education tax from 2.0% to 2.5% on the assessable profit of companies registered in companies excluding small companies. This is payable within 30 days after notice of assessment from the FIRS as opposed to the 60days earlier provided in the Finance Act of 2020.

(g) Companies involved in educational services are to pay Corporate Income Tax notwithstanding that their activities are of a public character.

(h) Every arm of government in Nigeria can now borrow for critical reforms leading to development. The Finance Act 2021 has amended the Fiscal Responsibility Act of 2007 with regards to debt management by the government which allows it to borrow for capital expenditure and human development. The borrowing powers of all tiers of government have been expanded.

(i) A science and engineering levy of 0.25% of profit before tax is payable by commercial companies in the banking, mobile telecommunication, ICT, aviation, maritime, and oil and gas sector with a turnover of ₦100,000,000 (one hundred million Naira) and above operating in the bank.

The amendments of relevant tax, excise, and duties laws by the Finance Act 2021 are keys to improving public revenue and management of the Nigerian government. The government is expanding its tax base and promoting financial growth in the capital market.