On 13th January 2020, President Muhammadu Buhari, GCFR signed the 2019 Finance Bill into law (now the Act). The passage of the Bill into law has brought certain significant changes into the Nigeria tax system. It is important to note that there are some changes in the Finance Act, which were not in the Finance Bill. These changes, as well as others, have been included in this article.
The Act has 57 different sections and it amends 7 different tax laws with over 75 changes in the various applicable tax laws. The strategic objectives of the Act includes:
1. Promoting fiscal equity by mitigating instances of regressive taxation
2. Reforming the domestic tax laws to align with global best practices
3. Introducing tax incentives for investment in infrastructure and capital market
4. Supporting small businesses in line with the ease of doing business reforms
5. Raising revenue for government, by variousfiscal measures including a proposed increase in the rate of value added tax (VAT) from 5% to 7.5%.
Recently, the Minister of Finance, Mrs. Zainab Shamsuna Ahmed, announced the effective date for the commencement of the new VAT rate (i.e. from 5% to 7.5%) to be from 1st February 2020.
In view of the above, the objective of this article is to highlight some of these key changes that will now be applicable to all taxpayers in the discharge of their compliance obligations to the relevant tax authorities, on these tax types (i.e. direct and indirect taxes compliance)
This initiative is a welcome development in the Nigeria tax system as we expect these to continue in the future as it will positively impact on the Nigeria's fiscal and economic outlook. However, we expect the Federal government to come up with clear and workable transition guidelines that would ensure smooth conversion to the new changes introduced by the Finance Act, 2019 into the Nigerian tax space. It is also expected that FIRS will issue information circulars regarding the new changes for effective administration and implementation of these great strides in the Nigerian tax system. It is our expectations that this new tax regime will attract foreign investors to Nigeria. These changes will also promote the ease of doing business in Nigeria for both local and foreign investors.